Equilibrium—Where Demand and Supply Intersect

Because the graphs for demand and supply curves both have price on the vertical axis and quantity on the

horizontal axis, the demand curve and supply curve for a particular good or service can appear on the same
graph. Together, demand and supply determine the price and the quantity that will be bought and sold in a
market.

Figure 3.4 illustrates the interaction of demand and supply in the market for gasoline. The demand curve (D) is

identical to Figure 3.2. The supply curve (S) is identical to Figure 3.3. Table 3.3 contains the same information

in tabular form.

FIGURE 3.4 Demand and Supply for Gasoline The demand curve (D) and the supply curve (S) intersect at the

equilibrium point E, with a price of $1.40 and a quantity of 600. The equilibrium price is the only price where

quantity demanded is equal to quantity supplied. At a price above equilibrium like $1.80, quantity supplied exceeds
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