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Equilibrium Price: The Correlation Between Supply And Demand

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Equilibrium price is the price where the quantity of goods supplied is similar to the quantity of the demanded goods (Thomas & Maurice, 201). In detail, when plotted on a graph, equilibrium is the point at which the demand curve and the supply curve intersect. Simultaneously, equilibrium quantity is where quantity demanded is similar to the quantity supplied. If the market dynamics change and the price fall below the equilibrium level, the quantity demanded will be much higher than the quantity supplied. There are two possible outcomes, a shortage will occur, or there will be excess demand for the product. On the contrary, if the price is above the equilibrium level, the quantity supplied will exceed the quantity demanded. Noticeably, this means that there will be an excess supply or a surplus of …show more content…

This means that a specific price or rate increase; the increased cost of input into the goods and services offered by Twilight Luxury Hotel will cause less of that good to be produced. In other words, the quantity supplied will be less, thus causing the supply curve to shift to the left because there is less no opportunity of making a profit from the service being provided (Thomas & Maurice, 2010). If the supply of the product decreases but, the demand remains the same, the equilibrium quantity will go down as the equilibrium price goes up (Thomas & Maurice, 2010). In the third scenario, when a new competitor enters the market and offers the same product as Twilight Luxury Hotel, the demand curve will remain the same. Since the product is perceived as identical regardless of the seller, no one is willing to charge higher than the other. For that reason, a flat demand curve is realized when two companies sell the same product or service (Feng, Jiang, & Liu,2018). Hence, the equilibrium price will remain constant but, equilibrium quantity will

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