Market equilibrium is when the number of things people want to buy matches the number of things sellers want to sell.
Imagine you're at a lemonade stand on a hot day. You have demand, that's how many kids want lemonade. And you have supply, that's how much lemonade you and your friends can make.
When Demand Changes
If it gets even hotter, more kids come to buy lemonade. That means demand increases. Now there are more buyers than sellers. To get the lemonade, kids might need to pay a little more. This makes you and your friends happy because you can sell each cup for a higher price.
When Supply Changes
Now imagine it starts raining, and you can't make as much lemonade. That means supply decreases. There are fewer cups of lemonade than kids want. So, the price goes up even more, or some kids might not get any lemonade at all!
If something happens to either demand or supply, it changes how much people pay and how many things they can buy, just like a hot day or a rainy one changes your lemonade stand!
Examples
- A fruit stand raises prices when more people want apples.
- A bakery lowers prices because they can make more bread.
- More kids buying ice cream makes it cost more.
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See also
- How Does The Equilibrium Price and Quantity Work?
- How Does Shifting Demand and Supply- Macro Topic 1.6 (Micro Topic 2.7) Work?
- How Does Y1 5) Market Equilibrium & Disequilibrium Work?
- How Does Factors That Shift Supply | Microeconomics Work?
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