Supply, demand and market equilibrium
In a competitive market, the demand curve slopes down (buyers want less as the price rises) and the supply curve slopes up (sellers offer more). The equilibrium is where they cross: the single price at which the quantity demanded = quantity supplied, so the market clears. Alfred Marshall's "scissors" of supply and demand remain the workhorse model of introductory economics.
Shifts versus movements along a curve
A change in the good's own price is a movement along a curve. A change in something else — income, tastes, the price of a substitute, input costs, technology or the number of buyers or sellers — shifts the whole curve and moves the equilibrium to a new price and quantity. Distinguishing the two is the core skill the model teaches.
How to use the calculator
Give the demand and supply curves their parameters. The tool solves for the equilibrium (P*, Q*), and at any price you pick it reports the resulting surplus (excess supply, price too high) or shortage (excess demand, price too low) that pushes the market back toward equilibrium.
Note: this is the idealized competitive model with linear curves, perfect information and no externalities, taxes or market power. Real markets add these frictions, which shift or distort the curves the simple model draws.
Frequently asked questions
What is market equilibrium?
Market equilibrium is the price and quantity at which the quantity demanded equals the quantity supplied, so there is no shortage or surplus and the market clears. Graphically it is where the supply and demand curves intersect.
What is the law of demand?
The law of demand states that, all else equal, the quantity of a good demanded falls as its price rises and rises as its price falls, which is why the demand curve slopes downward.
What causes a demand or supply curve to shift?
Demand shifts with income, tastes, prices of related goods, expectations and the number of buyers; supply shifts with input costs, technology, taxes, expectations and the number of sellers. A change in the good's own price is a movement along the curve, not a shift.
What is a surplus and a shortage?
A surplus is excess supply, which happens when the price is above equilibrium; a shortage is excess demand, which happens when the price is below equilibrium. Both create pressure that moves the price back toward equilibrium.
References
- A. Marshall, Principles of Economics (1890) — supply, demand and market equilibrium.
- N. G. Mankiw, Principles of Economics (Cengage).
- P. Krugman & R. Wells, Economics (Worth Publishers).