Equilibrium Quantity

Equilibrium quantity is the amount of a good or service bought and sold when the market is in balance: quantity supplied equals quantity demanded. At this point, there is no persistent shortage or surplus, and the corresponding price is the equilibrium price.

How it works

• Supply and demand are plotted with price on the vertical axis and quantity on the horizontal axis.
• The supply curve slopes upward: higher prices incentivize producers to supply more.
• The demand curve slopes downward: higher prices reduce consumers’ willingness to buy.
• The curves intersect at the market equilibrium. The intersection gives the equilibrium price and equilibrium quantity—the level at which buyers’ and sellers’ plans are mutually compatible.

In theory, this intersection represents an efficient allocation of resources and is the state toward which a competitive market naturally gravitates.

Assumptions and limitations

The basic supply-and-demand model relies on simplifying assumptions, so its conclusions should be applied cautiously:

• It treats a single market in isolation and assumes predictable behavior by buyers and sellers.
• It ignores externalities (costs or benefits borne by third parties). Externalities can cause market outcomes that are socially suboptimal even when supply equals demand.
• Real-world constraints such as logistics, income distribution, market power, technology, and regulation can shift supply or demand and change the equilibrium.

Example: During the 19th-century Irish potato famine, potato exports continued because the market equilibrium between producers and foreign consumers did not reflect the suffering of the impoverished local population—an illustration of how market equilibrium can coexist with severe social hardship.

Interventions such as taxes, subsidies, regulations, or social-welfare programs alter supply or demand and thereby change the equilibrium price and quantity.

Key takeaways

• Equilibrium quantity occurs where quantity supplied equals quantity demanded.
• It is found at the intersection of upward-sloping supply and downward-sloping demand curves.
• The model describes an efficient market outcome under idealized conditions but does not capture all real-world factors (externalities, distributional concerns, constraints).