If a surplus exists, then quantity demanded is less than quantity supplied, there will be pressure on price fall toward equilibrium.
When the quantity of supply of goods matches the demands for goods, it is called the equilibrium price. The market is said to be in a state of equilibrium when the main situation is in the phase of consolidation. Then, it can be concluded that demand and supply are comparatively equal. Equilibrium price examples are discussed below as well.
We can find the equilibrium price by using the equilibrium price formula. These are the steps:
- Calculate the supply function,
- Calculate the demand function,
- Set the equal amount of quantities for the demand and supply,
- Put this equilibrium price into a supply function,
- Check the result by putting the equilibrium price into the demand function.
A surplus implies the government has extra funds. These funds can be used toward public debt, to start new events, social service or Medicare service and also in reducing interest rates which can help the economy.
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