Market equilibrium
Without a tax, buyers and sellers agree on a price where quantity demanded equals quantity supplied. With a tax, the traded quantity matches at two prices: what buyers pay and what sellers keep.
A market you can move.
Shift a curve. Follow the price. Discover who gains.
Illustrative market · dollars per unit · units per dayPredict, move, explain.
Production becomes more costly at every quantity. Buyer preferences are unchanged.
Each exercise starts from price $60 and quantity 40, with no tax. Other conditions stay fixed.
Practice shortage and surplus at a fixed price
This exercise uses the current curves, with no tax. A chosen price does not shift either curve.
Quantity demanded: 40.0. Quantity supplied: 40.0. The market clears at this price.
Demand describes the whole relationship between price and quantity wanted. Quantity demanded is one point on that curve. Changing only the posted price moves along both curves.
Try a story
Supply & demand
Drag the D or S handle vertically to shift a curve. Click a colored region to understand it. Dashed gold = supply plus tax.
Buyers pay$60
Sellers receive$60
Units traded / day40
Market equilibrium
Without a tax, buyers and sellers agree on a price where quantity demanded equals quantity supplied. With a tax, the traded quantity matches at two prices: what buyers pay and what sellers keep.
Equilibrium quantity traded is unchanged. Buyer price is unchanged.
Compared with your saved market, sellers’ price is unchanged and total gains are unchanged dollars per day.
Without a tax, buyer and seller prices coincide. All mutually beneficial trades occur in this model.
Demand is unchanged. Any change in the buyer price moves buyers along D and changes quantity demanded, not demand. Supply is unchanged. Any change in the price sellers receive moves sellers along S and changes quantity supplied, not supply.
Moving along a curve responds to a change in the good’s own price. Shifting a curve changes demand or supply at every price. Steepness controls responsiveness; it is not a constant elasticity.
Where do the gains go?
Dollars per day · click to exploreTurn this experiment into a complete lesson.
Three lesson plans, printable activities, worked answers, and a single teacher license for one cohort of up to 30 learners. The interactive lab stays free.
See the $19 teaching pack → · Try the free activity and answers
The curve is demand. A point gives quantity demanded.
These words describe different changes. Practice them here, then use the market lab above to shift the curves.
Quantity demanded
The amount buyers are willing and able to buy at one particular price, in a stated period. On the graph, it is one quantity on D.
When this good’s price falls, quantity demanded rises along the same demand curve, other things equal. Say “quantity demanded increases,” not “demand increases.”
Move along the curves
This separate, fixed example has no tax. Change only the quoted price. Neither curve moves, and the price is not forced to equilibrium.
Quantity demanded: 40 units/day.
Quantity supplied: 40 units/day.
At $60, the market clears: both quantities are 40 units/day.
Move the price slider to compare with this equilibrium. Demand and supply remain unchanged.
Check your wording
See the math, assumptions, and learning sources
Inverse demand: P = 100 − 1Q. Inverse supply: P = 20 + 1Q. Traded Q = (demand intercept − supply intercept − tax) / (sum of slopes).
Consumer surplus = ½ × Q × (demand intercept − buyer price). Producer surplus = ½ × Q × (seller price − supply intercept). Tax revenue = tax × Q. Deadweight loss = ½ × tax × (no-tax Q − taxed Q).
Competitive market, linear curves, identical units, no externalities or transaction costs, and no government spending benefits modeled. Surplus is an economic measure of gains from trade, not a complete measure of wellbeing. Numbers are fictional, not estimates of a real market.
Read more: OpenStax: demand, supply, and efficiency · Elasticity and tax incidence.