How to Calculate Equilibrium Price

by Carter McBride; Updated September 26, 2017
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Equilibrium price is the spot on the y-axis where demand and supply intersect on a graph. The simplest way to find equilibrium price is to graph supply and demand, then find where they interest. It is possible to find equilibrium price using algebra based off the equation "y = m (x) + b" (in which "m" is the slope and "b" is the y-intercept).

Items you will need

  • supply and demand statistics
  • graphing program or graph paper
Step 1

Determine the supply equation. Since y = m (x) + b, replace "m" with the slope of the supply curve and replace "b" with the y-intercept of the supply curve. For instance, a supply curve has a slope of 3 and intercepts the y-axis at 6. The formula then is Quantity Supplied = 3 (x) + 6.

Step 2

Determine the demand equation. Since y = m (x) + b, replace "m" with the slope of the demand curve and replace "b" with the y-intercept of the supply curve. Demand curves are downward sloping, so the slope will be a negative number. For example, a demand curve has a slope of 4 and intercepts the y-axis at 15. The formula then is Quantity Demanded = 15 - 4 (x).

Step 3

Set quantity demanded to equal quantity supplied. In our example, 6 + 3 (x) = 15 - 4 (x).

Step 4

Use algebra to solve for "x". In our example, "x" equals $1.2857. Thus, the rounded equilibrium price is $1.29.

About the Author

Carter McBride started writing in 2007 with CMBA's IP section. He has written for Bureau of National Affairs, Inc and various websites. He received a CALI Award for The Actual Impact of MasterCard's Initial Public Offering in 2008. McBride is an attorney with a Juris Doctor from Case Western Reserve University and a Master of Science in accounting from the University of Connecticut.

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