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The point where supply and demand meet and prices are set is called:
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3. Supply and Demand
Overview of Supply and Demand Shifts
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On a graph, an equilibrium point is where:
A
the demand curve reaches its maximum
B
the supply curve is horizontal
C
the demand curve intersects the supply curve
D
the price is zero
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Understand the concept of market equilibrium: it is the point where the quantity demanded by consumers equals the quantity supplied by producers.
Recall that the demand curve shows the relationship between price and quantity demanded, typically downward sloping, and the supply curve shows the relationship between price and quantity supplied, typically upward sloping.
Identify that the equilibrium point occurs where the demand curve and supply curve intersect on the graph, meaning the price and quantity at which the market clears.
Note that the equilibrium is not necessarily where the demand curve reaches its maximum or where the supply curve is horizontal; these conditions do not define equilibrium.
Conclude that the correct definition of the equilibrium point is the intersection of the demand and supply curves, representing the market-clearing price and quantity.
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