Definition: The equilibrium price occurs when the quantity that the buyers wish to acquire is equal to the amount that the sellers wish to sell. The market reaches the equilibrium at the price at which the quantity demanded is equal to that offered because the supply and demand curves are cut.
Let's analyze the data for the four different scenarios to understand when an equilibrium price is reached:
1. Price=$ 10, Quantity Supplied of Shoes=0, Quantity Demanded of Shoes=500
In this scenario, the company does not sell shoes despite the demand of 500 units. Then, the price is not the equilibrium price.
2. Price=$ 50, Quantity Supplied of Shoes=100, Quantity Demanded of Shoes=300
In this scenario, the company sells 100 shoes despite the demand of 300 units. Then, the price is not the equilibrium price.
3. Price=$ 75, Quantity Supplied of Shoes=250, Quantity Demanded of Shoes=250
In this scenario, the company sells 250 shoes and the demand is exactly the same, 250 units. Then, the price is the equilibrium price.
4. Price=$ 100, Quantity Supplied of Shoes=400, Quantity Demanded of Shoes=0
In this scenario, the company pretends to sell 400 shoes, but the potential buyers do not want to purchase at this price and the demand is 0 units. Then, the price is not the equilibrium price.
The correct answer is the equilibrium price for shoes is $ 75.
In a market economy, price is determined by the interaction between supply and demand. The equilibrium price is found when supply equals demand. In a graph is the point where the two curves intersect.
In your example, when the price is $ 10, no one is willing to sell (the supply is zero) and a lot of people are willing to buy, (the demand is 500). Similarly, when the price is too high, a lot of people want to sell (the supply is 400), but nobody wants to buy, (the demand is zero).
However, when the price is $ 75, 250 people want to buy and 250 people want to sell, ie OFFER = DEMAND IN A BALANCE PRICE FOR $ 75
Price $10/$50/$75/100
Quantity Supplied: 0/100/250/400
Quantity Demanded :500/300/250/0
