How to Calculate the Equilibrium Price

The equilibrium price is the point on the axis where demand and supply intersect in a graph. The simplest way to find the equilibrium price is to make a graph of supply and demand, and then find where they come together. It is possible to find equilibrium prices using the algebra based on the equation “y = m (x) + b” (where “m” is the slope and “b” is the intersection point).

Determine the supply equation. Since y = m (x) + b, substitute “m” with the slope of the supply curve and replace “b” with the point of intersection of the supply curve. For example, a supply curve has a slope of 3 and intercepts the y-axis in 6. The formula is then, quantity supplied = 3 (x) + 6.

Determine the demand equation. Since y = m (x) + b, substitute “m” with the slope of the demand curve and replace “b” with the point of intersection of the supply curve. The demand curves are descending, so the slope will be a negative number. For example, a demand curve has a slope of 4 and intercepts the y-axis in 15. The formula below shows the quantity demanded = 15 – 4 (x).

Set the quantity demanded to the same quantity supplied. In our example, 6 + 3 (x) = 15 – 4 (x).

Use the algebra to solve “x”. In our example, “x” equals 1,2857.

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