Equilibrium means a state of equality or a state of balance between demand and supply. The price at which the quantity demanded by consumers and the quantity supplied by the sellers are equal is called Market Price or Equilibrium Price. It is set by the interaction of Demand and Supply. For example, the daily demand and supply schedules for T-shirts in a city are as under.





Effect of Shift in Demand on Market Price and Quantity:
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Fig.5: Increase in Demaand Fig.6: Decrease in Demand
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1.The outward shift in the demand from D1 to D2 (Fig.5) will result into a rise in the market price (P1 to P2) as well as a rise in equilibrium quantity (Q1 to Q2). E.g. AC in summer.
2.In case of inward shift in demand (Fig.6) from D1 to D2, there will be a fall in market Price (P1 to P2) and quantity (Q1 to Q2). E.g. AC in winter.