Equilibrium

is a market condition when the quantity demanded and the quantity supplied are equal. The price no longer fluctuates at this point. Buyers can purchase their desired quantity of a good without having to pay at a premium just to get what they require because its out of stock or there is a shortage in supply. Sellers could sell exactly what they have in their inventory without having to lower the price to get rid of one product before it rots.

When buyers can't purchase the quantity they want, there is a shortage because a supplier's rate of production can't keep up with the volume of demand. On the graph it is the area below the equilibrium since the quantity demanded is higher than the quantity supplied. Sellers who couldn't sell everything in their inventory before the date the products expire is called a surplus. On the graph it is in the area above the equilibrium where the quantity supplied or inventory is way too much for the people who demanded the product or individuals who intended to buy.

Equilibrium

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