Market Equilibrium
Competitive Market Equilibrium
AO4·Diagram required
Syllabus requirement
How the demand and supply curves interact to establish the market equilibrium price and quantity.
Assessment objectives
AO4 Use of Appropriate Skills
Required diagram: Basic supply and demand diagram showing equilibrium at the intersection point, with labeled price and quantity axes.
Summary
Market equilibrium describes the price and quantity where the demand and supply curves intersect and the market clears, leaving no excess demand or supply. This topic explains how consumer surplus, producer surplus and social (community) surplus are determined at equilibrium, why equilibrium is allocatively efficient (P = MC), and how failures of the price mechanism — such as externalities or public goods — can prevent markets from maximizing welfare.
