Market Equilibrium: If there is one result that students are likely to recall from past coursework, it is the fact that the intersection of the supply and demand curves marks the equilibrium point in the market.  Despite this familiarity, however, it is important to take the time to work through any parts of the discussion that are new (e.g. solving for equilibrium price and quantity algebraically).  

 

It is often easiest to remind students of why the intersection of supply and demand is the equilibrium by considering prices that are both higher and lower.  Label the (potential) equilibrium price in the diagram and then ask students to think about high prices (those above this proposed value) and low prices (those below this value).  It should be relatively easy for students to recall and see that at high prices there is a surplus where quantity supplied exceeds quantity demanded.  It also should be relatively easy for them to suggest that prices should fall in this circumstance.  Likewise, at low prices there will be a shortage as quantity demanded exceeds quantity supplied.  This disequilibrium should lead to rising prices.  This leaves only the point where quantity supplied equals quantity demanded as the spot where there is no market pressure for prices to rise or fall, i.e. the market is in equilibrium.