Equilibrium
Where S = D.
Price determination
Key definitions
Disequilibrium
Any market position where S ≠ D.
Excess demand
D > S — shortage at current price.
Excess supply
S > D — surplus at current price.
Market clearing
Price adjusts until S = D.
Extension
Movement along curve when price changes.
Shift
New S or D curve from non-price factors.
Inelastic markets
Price changes sharply when curves shift.
Elastic markets
Quantity adjusts more than price.
Commodities
Often inelastic — large price swings.
Equilibrium price
Price where quantity demanded equals quantity supplied.
Key concepts
Excess supply pushes price down; excess demand pushes price up until equilibrium.
Start every S&D analysis at equilibrium unless told otherwise.
Oil supply shocks show inelastic markets with large price effects.
Relevant tips
- Show excess supply/demand on diagrams before explaining adjustment.