The market price of a good

The price with which buyers and sellers are both content is the market price: at it the quantity demanded equals the quantity supplied. It is called the equilibrium price, and the quantity at that price is the equilibrium quantity. On a graph the point where the D and S lines cross (M) is the equilibrium point; because the lines look like scissors it is called “Marshall’s scissors”. If the price is below equilibrium, demand exceeds supply, so goods run short: a shortage market. If the price is above equilibrium, supply exceeds demand, so goods are left over: a surplus market. If a price is fixed away from equilibrium, one of these two situations appears. In a free market the price itself moves toward equilibrium: under a shortage it rises, under a surplus it falls.