Who this is for: Cambridge IGCSE Economics (0455) students who want market equilibrium — equilibrium price and quantity, shortages, surpluses and price adjustment — to become a reliable source of marks instead of a diagram they draw without explaining the mechanism.
What query it owns: how to understand and revise market equilibrium in Cambridge IGCSE Economics.
Why this is safe: this page owns the market equilibrium revision-guide angle, while Tutopiya’s Market Equilibrium subtopic page owns the learning resource and the free Market Equilibrium quiz owns the practice.

Market equilibrium occurs where quantity demanded equals quantity supplied, determining the equilibrium price and quantity in a free market. Cambridge IGCSE Economics (0455) expects you to identify equilibrium on a supply-and-demand diagram, explain shortages and surpluses, and describe how price adjusts to restore balance. This guide links each market position to the explanation questions examiners set.

Key takeaways

• Equilibrium price is where quantity demanded = quantity supplied (no tendency for price to change).
• Equilibrium quantity is the amount bought and sold at the equilibrium price.
• A shortage (excess demand) occurs when price is below equilibrium — price tends to rise.
• A surplus (excess supply) occurs when price is above equilibrium — price tends to fall.
• A shift in demand or supply creates a new equilibrium price and quantity.

What is market equilibrium in Cambridge IGCSE Economics?

Market equilibrium is the point at which the demand and supply curves intersect, so there is no pressure on price to change. Cambridge IGCSE Economics (0455) tests whether you can read equilibrium from a diagram, explain why disequilibrium creates shortages or surpluses, and trace the adjustment process that restores balance.

You can read the full explanation, diagrams and notes on Tutopiya’s Market Equilibrium subtopic page before you attempt questions.

Core equilibrium definitions you must know

Term	Definition	Diagram signal
Equilibrium price	Price where Qd = Qs	Intersection of D and S
Equilibrium quantity	Quantity traded at equilibrium	Horizontal value at intersection
Shortage	Qd > Qs at current price	Price below equilibrium
Surplus	Qs > Qd at current price	Price above equilibrium
Market clearing	All willing buyers and sellers trade at equilibrium	No unsold stock, no unmet demand

How to find and explain equilibrium — step by step

1. Draw demand (D) and supply (S) on the same axes — price vertical, quantity horizontal.
2. Find the intersection — this is equilibrium (label Pe and Qe).
3. If price is below Pe — identify shortage: Qd > Qs; explain upward price pressure.
4. If price is above Pe — identify surplus: Qs > Qd; explain downward price pressure.
5. If a curve shifts — draw the new curve, find the new intersection, compare old and new Pe/Qe.
6. Describe the adjustment — price moves until Qd = Qs again.

Test yourself with the free Market Equilibrium quiz once you can trace adjustment from any disequilibrium price.

Shortage vs surplus: comparison table

Situation	Price vs equilibrium	Qd vs Qs	Price pressure	Example
Shortage	Below Pe	Qd > Qs	Price rises	Concert tickets sold too cheaply
Surplus	Above Pe	Qs > Qd	Price falls	Unsold seasonal clothing
Equilibrium	At Pe	Qd = Qs	No pressure	Stable market price

Effect of shifts on equilibrium

Shift	Effect on equilibrium price	Effect on equilibrium quantity
Demand increases (shift right)	Price rises	Quantity rises
Demand decreases (shift left)	Price falls	Quantity falls
Supply increases (shift right)	Price falls	Quantity rises
Supply decreases (shift left)	Price rises	Quantity falls

Market equilibrium in past-paper wording: command words that matter

Command word / phrase	What the question wants	Typical equilibrium stem
Define	Precise meaning	”Define market equilibrium.”
Explain	Cause-and-effect mechanism	”Explain how a surplus leads to a fall in price.”
Using a diagram	Draw and annotate	”Using a demand and supply diagram, show the effect of an increase in demand.”
Describe	What happens step by step	”Describe the process by which a market reaches equilibrium.”
Analyse	Full chain with new equilibrium	”Analyse the effect of a fall in production costs on equilibrium price and quantity.”

Worked exam-style stems (how to answer the wording)

1. “Define market equilibrium.” Market equilibrium occurs when the quantity demanded equals the quantity supplied at a particular price, so there is no tendency for price to change. Mark-scheme reward: Qd = Qs + no tendency for price to change.
2. “The current price is below the equilibrium price. Explain what happens in the market.” At this price, quantity demanded exceeds quantity supplied, creating a shortage. Consumers compete for limited goods, pushing price up until equilibrium is restored. Reward: shortage + upward price pressure.
3. “Using a diagram, show the effect of an increase in demand on equilibrium price and quantity.” Draw demand shifting right; new intersection is higher Pe and higher Qe. Explain that more is bought and sold at a higher price. Reward: correct shift + new equilibrium labelled.

How market equilibrium connects to the rest of Cambridge IGCSE Economics

Equilibrium builds on Demand and Supply, and leads into Market Failure when free markets do not reach efficient outcomes. The Cambridge IGCSE Economics resource hub links every Allocation of Resources subtopic.

Common mistakes students make

• Labelling the wrong intersection when multiple curves are drawn.
• Confusing shortage (below Pe) with surplus (above Pe).
• Forgetting to explain why price adjusts (competition among buyers or sellers).
• Showing a shift when the question only changes price (movement along curves).
• Not labelling new equilibrium after a shift (Pe₁ → Pe₂).

When you need more support

If equilibrium diagram questions keep costing marks, work through the Market Equilibrium quiz, then get focused help from a Cambridge IGCSE Economics tutor.

Frequently asked questions

Is market equilibrium hard in Cambridge IGCSE Economics? The concept is straightforward once you can read intersection points and explain shortage/surplus adjustment.

What is equilibrium price? The price at which quantity demanded equals quantity supplied, with no tendency for price to change.

What happens when there is a shortage? Quantity demanded exceeds quantity supplied, so price rises until the market reaches a new equilibrium.

How do I revise market equilibrium effectively? Practise combined D+S diagrams, trace shifts to new equilibrium, then take the Market Equilibrium quiz.

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