# price and quantity determination

Price and quantity determination is the process of finding the equilibrium price and quantity in a market. In a competitive market, the price and quantity are determined by the interaction of supply and demand.

The demand curve represents the quantity of a good or service that consumers are willing and able to buy at different prices, while the supply curve represents the quantity of the good or service that producers are willing and able to sell at different prices.

At the point where the supply and demand curves intersect, the market is in equilibrium. At this point, the quantity supplied equals the quantity demanded, and the price is called the equilibrium price as Price and quantity determination

If the price is below the equilibrium price, there will be excess demand, which creates a shortage. If the price is above the equilibrium price, there will be excess supply, which creates a surplus.

Market forces will then work to restore equilibrium by either increasing or decreasing the price. For example, if there is excess demand, the price will tend to rise, and if there is excess supply, the price will tend to fall until the equilibrium is reached.

### PRICE AND QUANTITY DETERMINATION UNDER MONOPOLY

In an imperfect market, also called monopolistic competition, prices of goods and services can easily be influenced by the sellers or buyers.

This is due to the fact that only a single producer or supplier of a particular commodity exists even though there might be many buyers. In this case, they have full control over price or output and different prices rule the market.

Equilibrium is the most efficient operating level for Price and quantity determination. In a situation where this happens, the monopolist will not have the slightest intention to quit the business since he has full control of both the price and output.

Equilibrium of the monopolist normally occurs where P>MC and MC = MR. The monopolist does not attain equilibrium by equating the price (P) of the goods with the Marginal Cost (MC).

From the diagram, it is observed that the profit-maximizing output is OQ1.

Price and quantity determination

The cost of the product and market price are OP 1 and OP2 respectively The monopolist makes abnormal profit in I shaded area represented by P2RSP1. the supernormal profit of a monopolist.

However, there are situations where i monopolist can suffer some losses. the AC curves are completely outside the revenue zone.

AC indicates that when I produced and sold the output of OQ2, its cost is over and above revenue. Thus, the monopoly made a total loss as shown in the shaded are£ in the diagram.

AC indicates that when I produced and sold the output of OQ2, its cost is over and above revenue. Thus, the monopoly made a total loss as shown in the shaded are£ in the diagram.

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demand and supply

1. RINDER PESTS
148. NEWCASTLE DISEASE
149. BACTERIA DISEASES
150. ANTHRAX
151. BRUCELLOSIS
152. TUBERCULOSIS
153. FUNGAL DISEASES