Market Metrics
Equilibrium Price
$50
Equilibrium Quantity
50
Consumer Surplus
$1,250
Producer Surplus
$1,250
Total Surplus
$2,500
Supply & Demand
Demand
Supply
Consumer Surplus
Producer Surplus
Deadweight Loss
Market Equilibrium
The market equilibrium occurs where the supply and demand curves intersect. At this point:
Quantity Demanded = Quantity Supplied
There is no pressure for price to change.
There is no pressure for price to change.
The equilibrium price "clears" the market - every unit produced finds a buyer, and every buyer finds a seller.
Qd(P*) = Qs(P*) → Equilibrium
Consumer Surplus is the area between the demand curve and the price line - it represents the benefit consumers get from paying less than their maximum willingness to pay.
Producer Surplus is the area between the price line and the supply curve - it represents the benefit producers get from receiving more than their minimum acceptable price.
Free Market Equilibrium: Supply equals demand at the equilibrium price.
Total surplus is maximized with no deadweight loss.
$50
Price
50
Quantity
$1,250
CS
$1,250
PS