EconomicsCBSE Class 11 · Market Equilibrium

Market Equilibrium: Equilibrium Price and Quantity, Excess Demand and Supply, Shifts

Updated 17 October 2026 · Fact-checked

Equilibrium occurs where market demand equals market supply: the equilibrium price clears the market. Above it there is excess supply and the price falls; below it there is excess demand and the price rises. With Qd = 200 - 10p and Qs = 20p - 40 the equilibrium is p = 8, q = 120. A rise in demand raises both price and quantity; a rise in supply lowers price and raises quantity.

Understand Equilibrium Price and Shifts in Demand and Supply

Equilibrium. The price at which quantity demanded = quantity supplied: the market clears. At that equilibrium price and equilibrium quantity neither buyers nor sellers wish to change their behaviour.

Excess demand and supply. At a price below equilibrium, Qd > Qs: excess demand, so competition among buyers pushes the price up. At a price above equilibrium, Qs > Qd: excess supply, so sellers cut prices.

Solving with linear functions. Let Qd = 200 − 10p and Qs = 20p − 40. Equate: 200 − 10p = 20p − 40 → 240 = 30p → p = 8; q = 200 − 80 = 120 (also 160 − 40 = 120 ✓).

At p = 10: Qd = 100, Qs = 160 → excess supply = 60 → price falls.
At p = 6: Qd = 140, Qs = 80 → excess demand = 60 → price rises.

Shift in demand (supply unchanged). If income rises, demand increases: Qd = 260 − 10p. Equate with Qs: 260 − 10p = 20p − 40 → p = 10; q = 160 (check: 260 − 100 = 160; 20 × 10 − 40 = 160 ✓). Price and quantity both rise. A fall in demand lowers both.

Shift in supply (demand unchanged). If costs fall, supply increases: Qs = 20p − 10 (30 more at each price). Equate with Qd = 200 − 10p: 200 − 10p = 20p − 10 → p = 7; q = 130 (200 − 70 = 130; 140 − 10 = 130 ✓). Price falls and quantity rises. If supply decreases (e.g. Qs = 20p − 70) the new equilibrium is p = 9, q = 110: price rises, quantity falls.

Both shift together. Demand increase (Qd = 260 − 10p) and supply increase (Qs = 20p − 10): 270 = 30p → p = 9; q = 170. Quantity rises for sure; the price change depends on which shift is larger (here price lies between 7 and 10, ending higher than the original 8).

Summary table.
| Change | Price | Quantity |
| Demand ↑ | ↑ | ↑ |
| Demand ↓ | ↓ | ↓ |
| Supply ↑ | ↓ | ↑ |
| Supply ↓ | ↑ | ↓ |

Perfectly inelastic supply (fixed quantity): a demand increase raises only the price.

Draw: demand and supply curves intersecting, with the shifted curve and new equilibrium.

Equilibrium Price and Shifts in Demand and Supply: key facts

Equilibrium: Qd = Qs; Solve for p, then q
Excess: Excess demand = Qd - Qs (p below equilibrium) | excess supply = Qs - Qd (p above); Price adjusts
Demand shift: Demand up: p up, q up | Demand down: p down, q down; Supply fixed
Supply shift: Supply up: p down, q up | Supply down: p up, q down; Demand fixed

How to answer Equilibrium Price and Shifts in Demand and Supply questions

Questions give demand and supply equations or schedules and ask for equilibrium or the effect of a shift.

1Equate Qd and Qs and solve for p.
2Substitute p into either equation for q and check with both.
3Compute excess demand or supply at a given price.
4For shifts, write the new equation and re-solve.
5State the direction of changes in words.

Equilibrium Price and Shifts in Demand and Supply in real life

The idea, met in an everyday situation. Answer the question in your own words, then compare with the model answer. The one-line hook is what to remember.

Mango season

Suppose a bumper mango crop reaches the market while demand stays the same.

What happens to price and quantity bought?

Try it first, then show the solutionSolution

Supply increases (shift right).
At the old price there is excess supply, so the price falls.
A lower price raises the quantity demanded; equilibrium has a lower price and a higher quantity.

Answer: Price falls; quantity rises.

Memory hook: Bumper crop, cheaper mangoes.

Tricks to remember Equilibrium Price and Shifts in Demand and Supply

Short memory aids. Say each one aloud once, then use it on a question the same day.

Equate and solve
Set Qd = Qs.
Use it when: Equilibrium
Demand and price move together
Demand shifts move price and quantity the same way.
Use it when: Demand shift
Supply up, price down
Supply increase lowers price; supply decrease raises price.
Use it when: Supply shift

Equilibrium Price and Shifts in Demand and Supply: solved examples

Ordered from board level to HOTS. Try each one before you open the solution.

Example 1: Find equilibrium · 4 marks · Short answerBoard level

Qd = 200 - 10p and Qs = 20p - 40. Find the equilibrium price and quantity, and verify.

Try it first, then show the solutionSolution

Set 200 - 10p = 20p - 40 (1 mark).
240 = 30p, so p = 8 (1 mark).
Q = 200 - 80 = 120 (1 mark).
Check Qs = 160 - 40 = 120 (1 mark).

Answer: p = 8; q = 120.

Example 2: Excess · 3 marks · Short answerBoard level

Find the excess demand or supply at p = 10 and p = 6, and the direction of price change.

Try it first, then show the solutionSolution

p = 10: Qd = 100, Qs = 160, excess supply 60, price falls (1 mark).
p = 6: Qd = 140, Qs = 80 (1 mark).
Excess demand 60, price rises (1 mark).

Answer: Excess supply 60; excess demand 60.

Example 3: Demand increase · 4 marks · Short answerHarder board level

Income rises so Qd = 260 - 10p, Qs unchanged. Find the new equilibrium and the change.

Try it first, then show the solutionSolution

260 - 10p = 20p - 40 (1 mark).
p = 10 (1 mark).
q = 260 - 100 = 160 (1 mark).
Price rises by 2 and quantity by 40 (1 mark).

Answer: p = 10; q = 160.

Example 4: Supply increase · 4 marks · Short answerHarder board level

Costs fall so Qs = 20p - 10, Qd = 200 - 10p. Find the new equilibrium and compare with the original.

Try it first, then show the solutionSolution

200 - 10p = 20p - 10 (1 mark).
30p = 210, p = 7 (1 mark).
q = 200 - 70 = 130 (1 mark).
Price falls from 8 to 7; quantity rises from 120 to 130 (1 mark).

Answer: p = 7; q = 130.

Example 5: Simultaneous shifts · 5 marks · Long answerHOTS / competency

Demand rises to Qd = 260 - 10p and supply rises to Qs = 20p - 10. Find the new equilibrium and say what would have been the price change if supply had risen by much more than demand.

Try it first, then show the solutionSolution

260 - 10p = 20p - 10 (1 mark).
30p = 270, p = 9 (1 mark).
q = 260 - 90 = 170 (1 mark).
Quantity rises for sure (from 120 to 170) (1 mark).
If supply rose by much more than demand, price would fall below 8; price depends on which shift is larger (1 mark).

Answer: p = 9; q = 170.

Where students lose marks in Equilibrium Price and Shifts in Demand and Supply

The slips examiners see most often, and what to write instead.

Mistake: Excess demand above equilibrium
Reversal.
Wrong working
At higher price there is excess demand.
Right working
There is excess supply.
Do this: Above: excess supply.
Usually costs: 1 mark.
Mistake: Only one equation solved
No check.
Wrong working
Find q from Qd only.
Right working
Check with both equations.
Do this: Verify.
Usually costs: 1 mark.
Mistake: Price falls when demand rises
Direction.
Wrong working
Demand up lowers price.
Right working
Demand up raises price.
Do this: Same direction.
Usually costs: 1 mark.

Exam tips

Equate and solve step by step.
Always verify with the second equation.
Name the direction of changes.
Explain price adjustment mechanism.

Practice questions on Equilibrium Price and Shifts in Demand and Supply

Write each answer on paper first. Open the hint only if you are stuck, and the answer only when you have finished.

Q1 · 1 mark · MCQBoard level
At a price above the equilibrium price there is
(a) excess demand (b) excess supply (c) equilibrium (d) shortage
Hint
Qs > Qd.
Answer
(b).
Q2 · 1 mark · Assertion-reasonHarder board level
Assertion (A): An increase in demand raises equilibrium price and quantity.
Reason (R): The demand curve shifts to the right along an upward-sloping supply curve.
(a) Both A and R are true and R is the correct explanation of A.
(b) Both A and R are true but R is not the correct explanation of A.
(c) A is true but R is false.
(d) A is false but R is true.
Hint
Standard result.
Answer
(a).
Q3 · 2 marks · Very short answerHarder board level
If supply falls so that Qs = 20p - 70 with Qd = 200 - 10p, find the new equilibrium.
Hint
Solve.
Answer
200 - 10p = 20p - 70 gives 270 = 30p, p = 9; q = 200 - 90 = 110. Price rises and quantity falls.
Q4 · 4 marks · Case-basedHarder board level
Read and answer.
Suppose a market has Qd = 200 - 10p and Qs = 20p - 40.
(a) Find the equilibrium. (2)
(b) Find excess supply at p = 10. (1)
(c) What happens to price? (1)
Hint
p = 8.
Answer
(a) p = 8, q = 120. (b) Qs - Qd = 160 - 100 = 60. (c) Price falls towards 8.
Q5 · 3 marks · Short answerHOTS / competency
Suppose both demand and supply fall together. State the effect on quantity and why the effect on price is uncertain, with a small example.
Hint
Depends on relative shift.
Answer
Quantity falls for sure. If demand falls more than supply, price falls; if supply falls more, price rises; if equal, price is unchanged. The result depends on the relative size of the shifts.

Test your recall

Answer in your head or on paper first, then open the card. Pulling an answer out of memory makes it stick far better than re-reading.

1.Equilibrium condition?Show answer
Qd = Qs.
2.Price above equilibrium?Show answer
Excess supply.
3.Demand increase effect?Show answer
Price and quantity rise.
4.Supply increase effect?Show answer
Price falls, quantity rises.
5.Both increase?Show answer
Quantity rises for sure.
6.Market clears when?Show answer
Plans of buyers and sellers match.

Equilibrium Price and Shifts in Demand and Supply: frequently asked questions

What is equilibrium price?

Price at which Qd equals Qs.

What is excess demand?

Qd greater than Qs.

Who adjusts price?

Competing buyers and sellers.

What shifts demand?

Income, tastes, related prices.

What if supply is fixed?

Price rises with demand and quantity does not change.