Page 1 - Home Assignment-Price determination

SAI INTERNATIONAL SCHOOL

ECONOMICS

(MODULE 77)

Class-XI

CHAPTER 4

PRICE DETERMINATION

TOPIC-

-Equilibrium price and qantity

-Concept of excess demand and excess supply

In a competitive market, the equilibrium price and quantity are
determined at the point where the demand for the product is equal to the supply
of the product i.e. Demand = Supply

Usually the demand curve slopes downward showing an inverse
relationship between price and quantity demanded of the product, whereas
the supply curve slopes upward showing a positive relationship between price
and quantity supplied of the product
Y
S
Pric
e
A B

1

P E
L
M
0

D
X
Q (Quantity demanded and quantity supplied)

In the above diagram the equilibrium price ‘OP’ and quantity ‘OQ’ is
determined at the point ‘E’ where market demand for the product is equal to
the market supply of the product.