Equilibrium price is a term that is often used in economics. However, do you already know what is meant by equilibrium price and how to find its value? The following is an explanation regarding the understanding of the equilibrium price, formulas, case examples and how to calculate it! Understanding the Equilibrium Price The buying and selling transaction itself usually involves a bargaining process between the seller and the buyer. Both will seek a price that they mutually agreed upon and then the sale and purchase transaction will be carried out. Basically, the equilibrium price is a price meeting point that is agreed by both parties for a sale and purchase transaction to occur. The interaction between sellers and buyers that causes buying and selling transactions is referred to as the market, so the equilibrium price is also commonly referred to as the market price. The equilibrium price is formed because of a meeting between supply and demand. At the equilibrium price, the quantity demanded is equal to the quantity supplied. The equilibrium price can be obtained in 3 ways, namely a mathematical approach using a formula, a curve approach, and a table approach. In this article, we will explain how to calculate the equilibrium price using a mathematical and curve approach. Also read: What is Volatility in the World of Economy and Investment? What is the Equilibrium Price Curve? As mentioned earlier, the curve approach can help you find the equilibrium price. To be able to use this method, you need a supply curve and a demand curve, so that later you will find the point of intersection of the two curves which is the point of balance. Next, from the balance point, you can draw a line to the price axis (P) to see the nominal balance price. Meanwhile, if you draw a line from the balance point to the Q axis, you will get the balance amount. For example, the equilibrium price curve below shows the equilibrium price of Rp. 3,000 while the equilibrium quantity is 12 kg. equilibrium price curve (Source: Fostering Economic Competence Book) Information: D= Demand curve S= Supply curve E= Equilibrium point P= Price of goods Q= Quantity of goods Formula and How to Calculate Equilibrium Price Furthermore, you can also use a mathematical approach by using a formula to calculate the equilibrium price. The market equilibrium price formula is as follows. Qd = Qs Where, Qd indicates the quantity demanded Qs is the quantity supplied. or Ps = Pd Where, PS is the bid price Pd is the asking price. equilibrium price formula (Source: Fostering Economic Competence Book) For example, it is known that the equation for the demand function for product A is as follows. Qd = 100 – 5P Meanwhile, product A's supply function is as follows. Qs = – 50 + 10P P is a function of the equilibrium price. So, what is the equilibrium price? Answer: Qd = Qs 100 – 5P = – 50 + 10p 15P = -150 P = -150 / -15 P = 10 Next, plug the value of P = 10 into the equation. Qd = 100 – 5 [10] = 100 – 50 = 50 Qs = -50 + 10 [10] = -50 + 100 = 50 Thus, it is found that the equilibrium price is Rp. 10 per product, and the equilibrium quantity is 50 units. Example of Market Equilibrium Market equilibrium is a condition in which the quantity of goods supplied is equal to the quantity of goods purchased or demanded and the supply price is equal to the demand price. The way to find the market equilibrium point is to use the demand curve and supply curve, where the point of intersection between the two curves is the market equilibrium point. An example of market equilibrium is as follows. For example, there is a shop A that produces 1,000 clothes and sells them for Rp. 150,000 per piece. However, during the sale it turned out that no one wanted to buy it. The shop also lowered the price to IDR 100,000 per piece, and at that price 250 clothes were sold. Furthermore, the store gave another discount and set a price of IDR 50,000 per piece of clothing and managed to get 1,000 buyers. In this case, when the price of goods is sold for IDR 50,000, the number of goods offered is equal to the number of goods purchased by consumers, namely 1,000 clothes. In conclusion, the equilibrium price in the example case is Rp. 50,000. Well, that's the understanding of the equilibrium price (Equilibrium), the formula to some examples of the use of the formula. Talking about supply and demand, this also applies in the crypto world , you know! Crypto itself is one of the investment assets that attracts the wider community today. Bitcoin as a crypto asset has also increased in value by more than 300% as of September 14, 2021, compared to the previous year. For those of you who are interested in investing in this field, download the Pintu application now! Buying and selling bitcoin and other crypto assets can start from as little as IDR 11,000, you know! Happy investing!