Markets usually end up in an equilibrium. 
The mechanism behind it is often difficult to 
grasp for students.
What will you learn.
You will learn that whenever the price is too high 
for an equilibrium it will fall.
You will learn that whenever the price is too low 
for an equilibrium it will increase.
$1.5 is the equilibrium price.
You can see this because it will generate the 
same demanded and supplied quantities.
Lets try it. 
To find the demanded quantity we move 
horizontally to the blue demand curve 
and then vertically down. 
Quantity demanded is 5.
To find the supplied quantity associated with a 
price of $1.5 quantity,
we move from a price of $1.5 horizontally to the 
red supply curve 
and then vertically down. 
Therefore for a price of $1.5 quantity demanded 
and quantity supplied are simultaneously equal. 
This is an equilibrium.
We saw that a price of $1.5 creates an 
equilibrium were demanded and supplied 
quantity are the same. 
The question is, if the market will automatically 
generate  a price of $1.5. 
To answer this question we start with a price 
that is greater than the equilibrium price: 
For example $2.
We can see that a price of $2 generates a 
situation where quantity demanded is less than 
quantity supplied. 
How? 
The quantity demanded is further to the left 
(towards smaller numbers) than the quantity 
supplied.
Pause the video and check it out for yourself !
What happens if less goods are wanted than 
are supplied? 
Right, the price falls and thus moves towards 
the equilibrium price of $1.5.
What if the price is smaller than the equilibrium 
price of $1.
For example $1.
We can see that the quantity demanded is now 
greater than the quantity supplied.
Pause the video and check it out for yourself !
What happens if more goods are wanted than 
are supplied?
Right, the price increases and thus moves 
towards the equilibrium price of $1.5.
At the end no matter if the price is to high or to 
low, the market pushes it towards the 
equilibrium.
Here is the good thing: 
When markets anyway reach an equilibrium and 
we understand the process ones,
we don’t have to bother withthe mechanism any 
more.
We find the equilibrium and know that this is 
where we will end up.
