Market Equilibrium Class 12 Notes Economics Part A Chapter 5

Market: In economics, market is more than a geographical area or a ‘mandi’ where goods are bought and sold. Market is defined as a complex set of activities by which potential buyers and potential sellers are brought in close contact for the purchase and sale of a commodity.

A market must have the following features:

  1. Commodity, i.e., there must be a commodity which is being
  2. demanded and sold.
  3. Buyers and Sellers, i.e., there must be buyer and sellers
  4. of the commodity.
  5. Communication, i.e., there must be communication between buyers and sellers.
  6. Place Areas, i.e., there must be a place or area where buyers and sellers interact with each other. It may be a physical area or web space.

Equilibrium Price: In economics, the term equilibrium means the state in which there is no tendency on the part of consumers and producers to change. The two factors determining equilibrium price are demand and supply. Equilibrium Price is the price at which the sellers of a good are willing to sell the same quantity which buyers of that good are willing to buy. Thus, equilibrium price is the price at which demand and supply are equal to each other. At this price, there is no incentive to change.

Brief Summary of Impact of Changes in Demand and Supply on equilibrium price and Quantity

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