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Market demand curve reflects that quantity of commodity which every consumer wishes to purchase at different prices.

Market equilibrium is a situation of the market in which demand for a commodity in the market exactly matches its supply corresponding to a particular price.

Market demand is the sum total of quantities which are demanded by various consumers at a certain price in the market.

(a) Shifts to the right

Following are the three elements which affect the supply of a commodity:
(a) Supply changes when the cost of production changes. When cost increases, supply decreases, and when cost decreases, then supply increases.
(b) Supply is affected by new inventions. When the use of new replacement goods increases then the supply of old goods decreases.
(c) Technological changes affect supply of a product through changes in production level.

(c) To earn profit

Goods are demanded by families.

The market condition in which there is no tendency for change of any kind is called the state of equilibrium. In the state of equilibrium, both demand and supply are equal.
Market equilibrium : is that state of market, in which total market supply is equal to the total market demand.
Q_s = Q_d [Where Q_s = total market supply; 

Q_d = total market demand]

A producer is ready to sell different quantities of his goods at different prices at a certain time, which is called its supply schedule. The market supply schedule is obtained on totalling supply schedules of all the producers of the market.

(c) Attribute of want satisfying capacity

(a) Buyer and seller both

(b) Negative

Goods are supplied by the producing firms.

(b) Negative

Market equilibrium is a situation of the market in which demand for a commodity in the market exactly matches its supply corresponding to a particular price, called equilibrium price. Thus, in a state of equilibrium, the market clears itself as market demand = market supply of the commodity. There is neither excess demand nor excess supply. In such a situation, the price that prevails in the market is called equilibrium price. It is called general theory of price determination or price determination theory of demand and supply. Marshall assumes that price of a commodity is neither determined by demand (utility) nor supply of the commodity (cost of production), but it is rather determined by the forces of both – demand and supply.Effect of changes in supply on Equilibrium.

Supply of any commodity may change due to various factors. The main ones are:

1. Supply may change due to changes in cost of production. With increase in cost, supply decreases, and with decrease in cost, supply will increase.
2. New inventions also affect the supply of a product. Due to increased use of new substitutes, the price and supply of old goods decreases.
3. Technological change also changes the level of production. This results in change in supply.
4. Discovery of new sources of raw material increases the supply of goods.
5. Changes in the attitude of producer also changes supply.
6. Changes in government policy may also change the supply.

1. Improvement in technology
2. Decrease in production input prices.

(b) Negative

In this situation, price of product is not affected, whereas its quantity increases.

Its equilibrium price decreases, but the quantity of the product is not affected.

Price of the product increases, but its quantity is not affected.

There are two ways in which government interferes in an economy –

1. Directly
2. Indirectly.

(a) Increases

(d) None of these

If the commodity’s demand quantity increases and its supply quantity decreases, then its equilibrium price increases.

Price is not affected, but the quantity increases.

The product’s price is unaffected, but its quantity increases.

The price will remain stable due to lack of normal conditions in both demand and supply. If demand is lesser than supply, then there will be a decrease in price, and if the Supply is less than demand, then the price will increase.

When the market demand is more than the market supply at a certain price (S<D).

If the demand curve is shifted on the right side, then both equilibrium price and quantity will increase. On the contrary, if the demand curve shifts to the left side, then there is a decrease in equilibrium price and quantity.

Even if there is an increase in both demand and supply, there will be no change the equilibrium price if the proportional change in demand is equal to the proportional change in supply.

The price at which the equilibrium is established is called the equilibrium price.

(b) Unchangeability

Selling a product illegally at a price higher than the price fixed by the government is called black marketing.

The upper limit set by the government of the price of any product or service is called the Maximum Fixed Price.

Demand of labour increases.

When the total supply of the product produced by the industry at a given price equals its total demand, the industry is in the state of equilibrium.

Q_s = 140 + P
P = 20
= 140 + 20
Q_s = 160

There may be a demand surplus or a supply excess at any point other than the equilibrium point.

Determination of the highest quantity of consumption of a product by a person is known as rationing.

Equilibrium Price Q_D = Q_s
200 – P = 120 + P
2P = 200 – 120
P = 80/2
P = Rs. 40.

Excess Supply.

(c) to total cost

The supply of labour refers to the hours or days of labour, not the number of workers. Labour is from homes and families where the workers live. Therefore, the workers are labour and the firms are the purchasers of labour.

Equilibrium Quantity (q₀) = 200 – P
= 200 – 10
= 190.

Profit maximization.

When the market price is lower than the equilibrium price, there will be excess demand.

(a) Equilibrium price 

(b) Price ceiling

Equal to minimum average cost.

Wages are higher in urban areas compared to rural areas due to the following reasons. 

• Availability of skilled workers in urban areas. 
• Professionals in urban areas.
• Occupational and geographical mobility.
• Differences in risks in certain urban jobs.