ᴇǫᴜɪʟɪʙʀɪᴜᴍ

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only one combo of price and quantity where market

will settle

no participant has reason to change their behavior

where market supply and demand curves intersect

automatic tendency to gravitate towards this point

price higher than equilibrium - excess supply

price below then equilibrium - excess demand

competitive markets gravitates towards equilibrium

extremely effective method of allocating resources

inform potential demanders about opportunity cost

maximize benefits buyers and sellers receive

height of demand curve reveal willingness to pay

of the marginal buyer

consumer surplus - surplus value consumers receive

area below demand curve and above market price

producer surplus - market price exceed opportunity cost

total surplus - combine consumer and producer surplus

satisfies Pareto efficiency if total surplus maximized

market planner need to know value placed on good

competitive market achieve same results through

self interested actions