Price | Class 12 Economics Notes
By ConceptScroll Team · Published on 17 July 2026 · 3 min read
Price – this guide gives you a concise, exam-ready overview of Price from Class 12 Economics, written by ConceptScroll editors and reviewed against the latest NCERT textbook.
Market Equilibrium
This chapter builds upon the concepts introduced in Chapters 2 and 4, where consumer and firm behavior under price-taking conditions were studied. In Chapter 2, the individual's demand curve was explained as the quantity a consumer is willing to buy at various prices, assuming the price is given. Aggregating all consumers' demands results in the market demand curve, which shows the total quantity demanded at different prices. Chapter 4 discussed the supply side, where an individual firm's supply curve represents the quantity a profit-maximizing firm would supply at different prices, again assuming price-taking behavior. Aggregating all firms' supply curves yields the market supply curve.
In this chapter, these two behaviors are combined to analyze market equilibrium through demand-supply analysis. Market equilibrium is the state where the quantity demanded by consumers equals the quantity supplied by firms, and the market clears without excess demand or supply. The price at which this occurs is called the equilibrium price, and the quantity traded at this price is the equilibrium quantity. Mathematically, equilibrium is defined where market demand q^D(p) equals market supply q^S(p), with p* being the equilibrium price.
If the market supply exceeds demand at a price, there is excess supply; if demand exceeds supply, there is excess demand. The chapter also introduces the concept of the 'Invisible Hand,' a metaphor from Adam Smith, which describes how prices adjust to eliminate excess demand or supply, guiding the market toward equilibrium. This dynamic adjustment ensures that prices rise when there is excess demand and fall when there is excess supply, leading eventually to equilibrium.
📊 Diagram: Two diagrams illustrate the equilibrium concept: one showing the market demand and supply curves intersecting at equilibrium price p and quantity q, and another showing excess demand and excess supply situations at prices below and above p* respectively.
🧪 Activity: No specific activity in this introductory section.
🔗 Connection: Leads to detailed analysis of market equilibrium with fixed number of firms and the dynamics of excess demand and supply.
Frequently asked questions
Explain market equilibrium.
Market equilibrium is a situation in which the quantity demanded of a commodity equals the quantity supplied at a particular price. At this price, there is no tendency for the price to change, as the market clears with no excess demand or supply.
When do we say there is excess demand for a commodity in the market?
Excess demand occurs when the quantity demanded of a commodity exceeds the quantity supplied at a given price. This usually happens when the price is below the equilibrium price, causing more consumers to want the product than producers are willing to supply.
When do we say there is excess supply for a commodity in the market?
Excess supply occurs when the quantity supplied of a commodity exceeds the quantity demanded at a given price. This usually happens when the price is above the equilibrium price, causing producers to supply more than consumers want to buy.
What will happen if the price prevailing in the market is - (i) above the equilibrium price? - (ii) below the equilibrium price?
(i) If the price is above the equilibrium price, there will be excess supply (surplus) because producers want to sell more than consumers want to buy. This surplus will put downward pressure on the price, causing it to fall towards equilibrium.
(ii) If the price is below the equilibrium price, there will be excess demand (shortage) because consumers want to buy more than producers are willing to sell. This shortage will put upward pressure on the price, causing it to rise towards equilibrium.
Ready to ace this chapter?
Get the full Price chapter — interactive notes, diagrams, worked solutions, polls and a free practice quiz — in the ConceptScroll app.
Study smarter with ConceptScroll
Daily NCERT-aligned reels, AI doubt solving and chapter quizzes — all free.
Start learning freeContinue reading
- बाज़ार संतुलन | Class 12 Economics Notes
Clear NCERT-aligned notes on बाज़ार संतुलन for Class 12 Economics.
- बाज़ार संतुलन | Class 12 Economics Notes
Clear NCERT-aligned notes on बाज़ार संतुलन for Class 12 Economics.
- बाज़ार संतुलन | Class 12 Economics Notes
Clear NCERT-aligned notes on बाज़ार संतुलन for Class 12 Economics.