Market Equilibrium

The market demand curve is usually downward sloping (price drops as the quantity that buyers are willing to purchase increase). The market supply curve is usually upward sloping (price increases as quantity that sellers are willing to provide increases). In most cases, there is one price at which the amount that buyers are willing to purchase equals that amount sellers are willing to provide.

Invisible Hand: If there is a higher demand that supply at any given price, some buyers will be willing to pay more than the going price, causing some sellers to raise the price and increase output. This process will continue until the market is in equilibrium. If there is more being produced than demanded at any price, sellers will reduce prices and cut back on output, repeating this process until the market is in equilibrium.