# Equilibrium Quantity: Definition and Relationship to Price

## What Is Equilibrium Quantity?

Equilibrium quantity is when there is no shortage or surplus of a product in the market. Supply and demand intersect, meaning the amount of an item that consumers want to buy is equal to the amount being supplied by its producers. In other words, the market has reached a perfect state of balance as prices stabilize to suit all parties.

Basic microeconomic theory provides a model to determine the optimal quantity and price of a good or service. This theory is based on the supply and demand model, which is the fundamental basis for market capitalism. It assumes that producers and consumers behave predictably and consistently and there are no other factors influencing their decisions.

### Key Takeaways

• Equilibrium quantity is when supply equals demand for a product.
• The supply and demand curves have opposite trajectories and eventually intersect, creating economic equilibrium and equilibrium quantity.
• Hypothetically, this is the most efficient state the market can reach and the state to which it naturally gravitates.

## Understanding Equilibrium Quantity

In a supply and demand chart there are two curves, one representing supply and the other representing demand. These curves are plotted against price (the y-axis) and quantity (the x-axis). If looking from left to right, the supply curve slopes upwards. This is because there is a direct relationship between price and supply. The producer has a greater incentive to supply an item if the price is higher. Therefore, as the price of a product increases, so does the quantity supplied.

Meanwhile, the demand curve, representing buyers, slopes downwards. This is because there is an inverse relationship between the price and quantity demanded. Consumers are more willing to purchase goods if they are inexpensive; therefore, as the price increases, the quantity demanded decreases.