Find equilibrium and explain shortages or surpluses
Use demand and supply schedules or diagrams to trace equilibrium and market disequilibrium.
Cambridge IGCSE Economics 0455 / IGCSE (9–1) Economics 0987, 2027–2029 Version 1. Apply each model to the stated evidence and qualify conclusions where effects depend on context. Practice is original and self-checked; it is not a Cambridge paper, mark scheme or official grade.
Before you begin
- No prior economics study is assumed. Read the scenario for the decision-maker, the market or economy involved, the time period and the evidence supplied.
Work on paper. Try each question before revealing help, and explain why your method works.
Quick readiness check
What defines market equilibrium?
What you will learn
- Explain the price mechanism
- Identify equilibrium price and quantity
- Interpret shortages and surpluses
Equilibrium balances planned quantities
Market equilibrium occurs where quantity demanded equals quantity supplied. A schedule can show the matching price and quantity; a diagram shows the intersection of demand and supply.
The price mechanism can signal relative scarcity and encourage adjustments in purchases and production. This helps answer what, how and for whom to produce in a market system.
Disequilibrium creates adjustment pressure
If price is below equilibrium, quantity demanded may exceed quantity supplied, creating a shortage. If price is above equilibrium, quantity supplied may exceed quantity demanded, creating a surplus.
Shortage and surplus describe planned market quantities, not necessarily empty shelves or unsold stock everywhere. Actual adjustment depends on rules, inventories and how quickly prices or output can change.
Pause and explain
At a price of $8, supply is 120 and demand is 70. What is the market condition?
Worked example
At $4, buyers demand 90 units and sellers supply 60. At $6, demand is 60 and supply is 90. Find equilibrium in the schedule.
Show the worked solution
- At $4 there is a shortage of 30.
- At $6 there is a surplus of 30.
- The schedule balances at $5 if demand and supply change by 15 units per dollar.
Answer At $5, quantity demanded and supplied are both 75 units, so the equilibrium is $5 and 75 units under the stated linear pattern.
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Test this topic →From guided practice to a new situation
Write your answer and reasoning first. Use a hint only if you are stuck. The model solution is for self-checking; your written work is not automatically marked.
A schedule shows quantity demanded 40 and supplied 40 at $12. Identify the equilibrium pair.
Give me a hint
Equilibrium uses the price where the planned quantities match.
Compare my reasoning
- The matching quantity is 40.
- The corresponding price is $12.
- Report both values as the market pair.
Equilibrium price is $12 and equilibrium quantity is 40 units, based on this schedule.
Look for these in your work
- Price selected
- Equal quantity verified
- Pair reported
A legal maximum price is set below equilibrium and demand exceeds supply. Explain the likely market imbalance and one possible consequence.
Give me a hint
Compare planned quantities at the controlled price.
Compare my reasoning
- At the lower price, demand may exceed supply.
- This creates a shortage.
- Rationing, queues or non-price allocation may result, depending on rules.
A below-equilibrium maximum price can create a shortage because quantity demanded exceeds quantity supplied. Queues or rationing may appear, but the exact consequence depends on enforcement and allocation rules.
Look for these in your work
- Price compared with equilibrium
- Shortage explained
- Possible consequence qualified
A concert venue has 300 seats. At the posted price, 500 people want tickets and 300 tickets are offered. Explain the market condition and why raising price is only one possible response.
Give me a hint
Calculate excess demand and identify adjustment constraints.
Compare my reasoning
- Demand exceeds supply by 200 tickets.
- There is a shortage at the posted price.
- Price, capacity, resale rules or rationing could change allocation.
There is a shortage of 200 tickets. A higher price may reduce demand, but the venue may also keep capacity fixed and use a fair allocation rule; the suitable response depends on its objectives and regulations.
Look for these in your work
- Gap calculated
- Condition named
- Alternatives considered
Common mistakes
- Confusing a shortage with a surplus
- Calling any price with equal values of total revenue an equilibrium
- Assuming prices always adjust instantly
What can you explain now?
When does a market surplus occur?
Compare with the explanation
When quantity supplied exceeds quantity demanded
A surplus is excess planned supply at the current price.
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Make it stick
When does a market surplus occur?
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