Equilibrium Price: Understanding, Sounds of Law, How to Calculate, Problems

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Come on just take a good look at the reviews below.

Definition

do you know the hell what is equilibrium price?

In economics, the equilibrium price or also called equilibrium price or free price is the price created at the point where the demand curve meets the supply curve.

Briefit's like this "the price that has been agreed between the buyer and the seller". hihihi

Initially, the equilibrium price was formed because of the interaction between the buyer (demand) and the seller (bidder) in which the quantity of goods demanded and supplied was the same.

And if the equilibrium price has been achieved and is able to last a long time, it will usually be the benchmark for the buyer and seller in determining the price.

Information:

The interactions that occur between producers and buyers are strongly influenced by the law of demand and the law of supply.

This is because the sounds contained in the law of demand and law of supply are as follows:

• Law of demand states if demand tends to increase or when prices fall.
• Law of supply states that the supply tends to increase when the price increases.

so that, sound of law from The equilibrium price is a law that applies to the law of supply and demand which reads.

“If the quantity demanded is greater than the quantity supplied, the price will rise, while if the quantity supplied is greater than the quantity demanded, the price will fall.”

In a perfectly competitive market, price formation depends entirely on the strength between demand (buyers) and supply (producers).

Demand and supply can affect the formation of the price of an item.

Any changes in the price of goods can change the demand and supply.

To simplify the explanation above, pay close attention to the graph below:

Picture 1. the meeting point of the equilibrium price

How to Calculate the Equilibrium Price

There are 3 different ways to calculate the equilibrium price.

That is by using tables, curves, and a mathematical approach.

Here's an explanation of each:

Calculating Equilibrium Prices Using Tables

First thing What we need when calculating the equilibrium price using the table is First arrange the table.

The table contains the price (P), the quantity demanded (Qd), and the quantity supplied (Qs).

By going through the table, we can find out the same price between the quantity of goods demanded (Qd) and the number of goods supplied (Qs).

For more details, see the table below:

In the table above, we can see that at a price of Rp. 4,000, the number of goods demanded is equal to the number of goods offered.

And equilibrium price occurs when the price of goods is Rp. 4,000. And balance amount occurs when there are 60 pencils.

Calculating the Equilibrium Price Using the Curve

There are times when we will find tables that do not show directly the existence of prices and balance quantities.

For example, consider the table below:

The following is a demand and supply curve for cassava:

Figure 2. demand and supply curve

If we look at the curve above, it is clear that the demand and supply curves intersect which shows the equilibrium point (E).

The equilibrium point is seen at 60.350, this is what is called the equilibrium price.

Where the equilibrium price that occurs is Rp. 350, and the balance amount is 60 tons of cassava.

Calculating the Equilibrium Price by Using a Mathematical Approach Pendekatan

The third way is to use a mathematical approach. Where is this method used if the data we get is in the form of a demand function and also a supply function.

To get the equilibrium price between the supply and demand functions, you can use the following formula:

• Qd = Qs or Pd = Ps

Information:

• Qd = Quantity requested
• Qs = Quantity offered
• Pd = asking price
• PS = price offered

Example of a Balanced Price Question

The demand function for an item in the market shows that Qd = 40 – P, and the supply function Qs = 4P – 50.

What is the equilibrium price?

Answer:

The equilibrium price will be created if various conditions are met.

The condition for the equilibrium price itself is Qd = Qs or Pd = Ps

Qd = Qs

40 – P = 4P – 50

-P -4P = -50 -40

-5P = -90

P = -90/-5 = 18

Up to this point, we have obtained price The equilibrium P (price) is = 18.

Next in search Q or quantity In equilibrium we must enter the equilibrium price (18) into one of the above functions.

We can put P into the demand function or supply function.

P = 18 => Q = 40 – P

Q = 40 -18

Q = 22

So it can be seen the balance or Q = 22.

Thus a brief review of the equilibrium price, hopefully it can help your learning activities. Thank you for visiting :))