The following table shows the annual demand and supply in the market for shorts in Philadelphia. TTT Price Quantity Demanded Quantity Supplied (Dollars per pair of shorts) (Pairs of shorts) (Pairs of shorts) 1,375 250 12 1,125 500 18 1,000 625 24 750 1,125 30 625 1,500 On the following graph, plot the demand for shorts using the blue point (circle symbol). Next, plot the supply of shorts using the orange point (square symbol). Finally, use the black point (plus symbol) to indicate the equilibrium price and quantity in the market for shorts. Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically. 36 30 Demand 24 Supply 18 Equilibrium 12 250 500 750 1000 1250 1500 QUANTITY (Pairs of shorts) PRICE (Dollars per pair of shorts)
If the market price is equal to the quantity demanded, the market is in equilibrium. The equilibrium price or market clearing price is when the amount requested equals the quantity supplied, and the corresponding quantity is the equilibrium quantity.
In a market, sellers provide a good or service, and buyers, who do not yet own the good but wish to do so, deal with each other. Every time there is a pricing, sellers and purchasers pick how many units they wish to offer or supply at that price. The higher the market price of the good, the greater the supply of the good, and the greater the demand for the good. In a market in equilibrium, the amount demanded equals the quantity supplied at the price at which these two quantities are the same. The market is in equilibrium when neither a buyer nor a seller can find a buyer for a good they want to buy. The opposite is also true. In other words, at the equilibrium price, both sellers and buyers can sell and buy exactly what they want to at this price, resulting in a perfectly balanced market.
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