A market equilibrium is the point at which quantity supplied and quantity demanded are equal. At that point, buyers are willing to buy at the same price and quantity at which sellers are willing to sell. This price is the equilibrium price. On a graph, the equilibrium point is located at the point where the supply curve and the demand curve intersect.

     A market is said to be in disequilibrium when the quantity supplied does not equal the quantity demanded at a certain price. When quantity demanded is more than quantity supplied, there is excess demand. A price lower than the equilibrium price will encourage buyers and discourage sellers. Prices will rise because sellers hope to increase their profits. When quantity supplied is more than quantity demanded, there is excess supply. Prices will fall because sellers need to sell their supply. Whenever there is excess in supply or demand, market forces work to create equilibrium.

     Sometimes governments attempt to control prices in a market. Governments may set a price ceiling, a maximum price that can be charged. For example, some cities have price ceilings on rental apartments. If the price ceiling is lower than the equilibrium price, there will be excess demand. Fewer apartments are offered than people want to rent.

     Governments may also set a price floor, a lowest price that can be paid. An example is the minimum wage, the lowest hourly rate a business can pay workers. When a minimum wage is higher than the equilibrium rate, there is excess supply of labor.