How to use the interactive model:

• use the sliders or drag the curves to view changes in supply of demand

• use the sliders to visualise changes in price elasticity.

• the interactive will calculate the new equilibrium positions, as well as determine consumer surplusand producer surplus 

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Why is this stuff important to know?

Price equilibrium is a foundational concept in economics that demonstrates market efficiency. This is characterised by: 

• optimum quantity of trade at a price, and 

• where the benefits of trade (welfare) for both consumers and producers are at maximum levels. 

Economists consider this outcome to reflect the most efficient allocation of scarce resources (allocative efficiency).