Question

How can you locate the equilibrium point on a demand and supply graph?

Short answer

To locate the equilibrium point on a demand and supply graph, first identify the demand curve (downward sloping) and supply curve (upward sloping). Then, find the point where these two curves intersect, representing the equilibrium point. Finally, determine the equilibrium price and quantity by looking at the y-axis (price) and x-axis (quantity) coordinates of this intersection point.

Step-by-step solution

Identify the demand curve and the supply curve

First, determine which curve represents the demand and which curve represents the supply. The demand curve usually slopes downward, which means that as the price increases, the quantity demanded decreases. The supply curve usually slopes upward, which means that as the price increases, the quantity supplied increases.

Find the point where they intersect

Next, determine the point where the demand curve and the supply curve intersect. This point represents the equilibrium point because it is where the quantity demanded equals the quantity supplied. On a graph, this is the point where the two curves meet.

Identify the equilibrium price and quantity

Finally, read the values of the equilibrium point from the graph by looking at the x and y-axis. The x-axis represents the quantity, while the y-axis represents the price. The coordinates of the equilibrium point will provide the equilibrium quantity and price, respectively. The equilibrium price is the price at which the quantity demanded equals the quantity supplied, and the equilibrium quantity is the number of goods or services that sellers are willing to sell at the equilibrium price. In conclusion, to locate the equilibrium point on a demand and supply graph, identify the demand curve and supply curve, find the point where they intersect, and determine the equilibrium price and quantity from the coordinates of the equilibrium point.