How to determine the equilibrium price and equilibrium volume

We all know what the market is. Each of us makes daily purchases. From insignificant - buying a ticket on the bus, to large-scale ones - buying houses, apartments, renting land. Whatever the structure of the market: commodity, stock - all of its internal mechanisms are essentially the same, but nevertheless require special attention, since a person can not do without market relations.

Instruction manual

1

To find the equilibrium price and the equilibrium volume, a number of factors should be determined. Such as the magnitude of demand and the magnitude of supply. These market mechanisms affect equilibrium. There are also various market structures: monopoly, oligopoly and competition. In the monopolistic and oligopolistic markets, the equilibrium price and volume should not be calculated. In fact, there is no balance there. The monopoly firm itself sets the price and volume of production. In an oligopoly, several firms are united in a cartel in the same way that monopolists control these factors. But in competition, everything happens according to the rule of the "Invisible Hand" (through supply and demand).

2

Demand is a customer’s need for a product or service. It is inversely proportional to price and, therefore, the demand curve on the chart has a negative slope. In other words, the buyer always seeks to buy a larger volume of products at a lower price.

3

The number of goods and services sellers are ready to put on the market is an offer. Unlike demand, it is directly proportional to price and has a positive slope on the chart. In other words, sellers seek to sell a greater number of goods at a higher price.

4

It is the intersection point of supply and demand on the chart that is interpreted as equilibrium. What is demand, what is supply in tasks is described by functions in which two variables are present. One of them is the price, the other is the volume of production. For example: P = 16 + 9Q (P - price, Q - volume). To find the equilibrium price, two functions should be equated - supply and demand. Having found the equilibrium price, you need to substitute it in any of the formulas and calculate Q, that is, the equilibrium volume. This principle also works in the opposite direction: first the volume is calculated, then the price.

5

Example: It is necessary to determine the equilibrium price and the equilibrium volume if it is known that the supply and demand are described by the functions: 3P = 10 + 2Q and P = 8Q-1, respectively.

Decision:

1) 10 + 2Q = 8Q-1

2) 2Q-8Q = -1-10

3) -6Q = -9

4) Q = 1.5 (this is the equilibrium volume)

5) 3P = 10 + 2 * 1.5

6) 3P = 13

7) P = 4.333

Done.