Equilibrium: Mr. Demand, Meet Mr. Supply
The beauty of the market is that the competing motivations of consumers and producers interact to arrive at a price and quantity for a product that’s determined by impersonal market forces. You’ve heard the expression market price (or seen it written on menus next to the word lobster). The market price for a product is the price at which the quantity demanded is equal to the quantity supplied. Figure 4.5 shows how this occurs.
The arrows along the supply and demand curves in this chart indicate the pressures at work in the market for beef (or any market, for that matter). To understand how ...