The price and quantity demanded of a commodity they both go in opposite direction.  That is the lower the price, the higher the quantity demanded, while the higher the price, the lower the quantity demanded.

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The graphs of demand and supply curve are shown below:

Demand Graph

Supply Graph

Price Equilibrium

Price Equilibrium occurs at the point where the line of demand and supply crosses each other in the demand-supply curve. Equilibrium price point is shown in the graph below:

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Equilibrium Point Graph

Excess Supply and Scarcity of Supply

Any point above the equilibrium price point, there would be excess supply of commodity. While, at any point below the equilibrium price point, there would be scarcity supply of commodity.

Watch the video tutorial above to learn about the calculations involved in price equilibrium

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Objective Questions

Use the diagram above to answer questions 1 and 2

1) If the price of this good is N1 per unit, what will be the quantity demanded? A. 5 B. 10 C. 15 D. 20

2) What are the total benefits to this individual, if she consume 10units of the good? A. N5 B. N10 C N20 D. N30

3) From the graph above, at what point is the consumer and producer reach equilibrium with price? A. N10 B. N15 C. N20 D. N25

4) What happens when the price goes beyond equilibrium price? A. Surplus B. Scarcity C. No change in commodity D. All of the above

5) An increase in the price of electricity will A. Increase the demand for kerosene heaters B. Increase the demand for stereos C. Increase the demand for light bulbs D. Non of the above