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Understand The Concept Of The Point Of Equilibrium (for UPSC CSE)
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This lesson introduces the Point of Equilibrium with the help of graph. Ayussh also throws light on the concept of Equilibrium price and thereby discusses various scenarios with respect to what happens in the case of excess supply and shortage of supply. Both these cases are explained with the help of diagrams for a better apprehension of the concepts.

Ayussh Sanghi is teaching live on Unacademy Plus

Ayussh Sanghi
Passionate Educator - CSE / Other Govt Exams [Peep into my Unacademy Plus Courses & experience awesome learning.]

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thank u so much sir it's very helpful for ys excellent course sir
That was so amazingly explained Ayyush sir! Thankyou for the lessons and the hard work you've put in!!
Awesome teaching sir.what you teach covers mains too or only prelims?
Brother ! just wanted to pause fr a while and thank you fr your zest in teaching and making knowledge available to everyone free of cost . Yours is a revolution and may lord bless you all with your aim!!! iam from a science background btw and couldnt think possibly mastering economics but this endeavour of yours .
The explanation is so is helping me lot..thank you sir for this awesome teaching
Sir we are supposed to take independent variable on x-axis and dependent variable on y-axis but here we are relating quantity to price i.e., quantity depends on price. Why is it so?

  2. ABOUT ME Passionate about Teaching >Taught at most reputed Civil Services Institutes >CA, Lawyer Follow me on: AyusshSanghi

  3. POINT OF EQUILIBRIUM The market supply curve and market demand curve are taken together on the same figure. Wherever Market Demand and Supply Curve ill intersect, that point is called the Market's Equilibrium The price at this intersection is called the Equilibriunm Price. The quantity is called the Equilibrium Quantity

  4. POINT OF EQUILIBRIUM Supply Equil brium Demand (D Quantity

  5. EQUILIBRIUM PRICE o EP refers to the quantity of the good that buyers are willing and able to buy exactly balances the quantity that sellers are willing and able to sell. The EP is also referred to as market- clearing price because, at this price, everyone in the market is willing to buy/sell. Buyers have bought all they want to buy, and sellers have sold all they want to sell. The actions of buyers and sellers naturally move markets towards the equilibrium of supply and demand.

  6. CASEI - EXCESS SUPPLY OR SURPLUS Let's say that the market price is above the equilibrium price, as in the given Diagram It is considered to be a surplus of the good. Suppliers are unable to sell all thev want at the current price. A surplus is sometimes called a situation of excess supply. Suppliers respond to the surplus by reducing their prices. Looking at the fall in prices the quantity demanded will increase but quantity supplied would decrease Prices would continue to fall until the market reaches the equilibrium

  7. EQUILIBRIUM PRICE Equilibrium Point Surplus Market Equilibrium Price shotage D. S Shortage Low Quantity High

  8. CASE II LESS SUPPLY OR SHORTAGE On the other hand let's say that market price is below the equilibrium price, as in the Diagram o There is a less of that good. People who demand are unable to buy what they want at the current price. o This is a case of shortage. A shortage is also called a situation of excess demand which is not fulfilled by the suppliers. Reason maybe suppliers are not getting adequate prices for their produce. shortage by raising their prices without losing sales. market once again moves toward the equilibrium. The activities of the many buyers o In this case too many buyers chase too few goods, sellers can respond to the o As the price rises, the quantity demanded falls, the quantity supplied rises, and the and sellers automatically push the market price toward the equilibrium price.

  9. EQUILIBRIUM PRICE Equilibrium Point Surplus Market Equilibrium Price shotage D. S Shortage Low Quantity High