Calculating Equilibrium Price: Definition, Equation & Example

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  • 0:01 Definition
  • 0:22 Equation & Example
  • 2:27 Lesson Summary
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Lesson Transcript
Kallie Wells
Expert Contributor
Steven Scalia

Steven completed a Graduate Degree is Chartered Accountancy at Concordia University. He has performed as Teacher's Assistant and Assistant Lecturer in University.

How is the market price determined? This lesson will explain what the market price is and also walk you through an example of determining the equilibrium price.


The equilibrium price is the market price where the quantity of goods supplied is equal to the quantity of goods demanded. This is the point at which the demand and supply curves in the market intersect.

To determine the equilibrium price, you have to figure out at what price the demand and supply curves intersect.

Equation and Example

This is easiest to see visually on this graph:

Market Equilibrium
Market Equilibrium

The supply and demand curves intersect at P* and Q*, which are the equilibrium price and quantity.

It's one thing to be able to identify the equilibrium price on a graph, but you should also be comfortable figuring out the price algebraically. Here are the supply and demand curve formulas for this example: Qd = 50 - 5P and Qs = 5 + 10P.

The supply curve is denoted as Qs, and the demand curve is denoted as Qd. They are both written as a function of price. If you happen to get formulas that are price as a function of quantity, then you would want to rearrange the formula to match this format.

To find the equilibrium price, you want to find the price at which the two equations intersect. In other words, find the price when the quantities Qs and Qd are the same. This is done by simply setting the two equations equal to one another, then solving the equation for P.

Let's go through this together.

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Additional Activities

Calculating The Equilibrium Price:

The case scenario below will provide you with the ability to practice calculating the equilibrium price of a given market.

You are a research associate in the Economics department at a large, multinational bank. You have been assigned the task to study the relationship between the supply and demand of the pork belly market in Kazakhstan. Although very little research has been done to date on the market, your colleagues have performed extensive interviews with various market participants and have determined the following equations for supply and demand.


  • Qs stands for quantity supplied
  • Qd stands for quantity demanded
  • P stands for price.


Qs = 128 + 8P

Qd = 478 - 6P


  • Calculate the equilibrium price for the pork belly market in Kazakhstan by using the supply and demand equations above. Show all necessary steps to solve for P.
  • Do a quality check and put your answer back into the supply and demand equations to see that it is correct.


We need to make the quantity supplied equal to the quantity demanded in order to determine the equilibrium price.

Qs = Qd

128 + 8P= 478 - 6P

128 + 8P +6P= 478

8P +6P= 478 -128

14P = 478 -128

14P = 478 -128


P = 350/14


At the price of $25, the supply and demand curves will intersect. Therefore the equilibrium price is $25.

Quality check:

128 + 8 (25) = 478 - 6 (25)

328 = 328 so the answer checks out.

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