The price of a good is formed due to the level of demand and supply of the good. The equilibrium price is when the supply of a good equals the demand of the good. On a supply-de… See more

As shown by Figure 1, when the price is high there is a high amount of supply as producers are willing to sell more of their good at a higher price because it means their profit … See more

Figure 2 shows that the intersection of the supply and demand curves is the equilibrium price. The equilibrium price can be abbreviated to Pe and the equilibrium quantity ca… See more

This system of demand and supply controlling the price of a good is known as the price mechanism. It can only function in free market conditions where there is no governmen… See more