Market Price-Equilibrium Price
Equilibrium price can be defined as the price at which the quantity demanded is equal to the quantity supplied.
Market Price can be defined as the price prevailing in the market. Prices are determined by supply and demand forces.
It is not necessary that Market Price is equivalent to Equilibrium price.
In the graph below the point at which the demand curve meets the supply curve is the equilibrium price.
Effect of change in Demand and Supply
Demand |
Supply |
Equilibrium price |
Equilibrium quantity |
|
Increase |
Unchanged |
Rise |
Rise |
|
Decrease |
Unchanged |
Fall |
Fall |
|
Unchanged |
Increase |
Rise |
Rise |
|
Unchanged |
Decrease |
Rise |
Fall |
