How is the equilibrium price determined in a perfectly competitive market?
Answer:
the equilibrium price is different in the short and the long run.
in the short run your equilibrium point in terms of price is where your marginal cost curve intersects your marginal revenue curve. now in teh short run depending on whether there is an excess or a shortage of firms your company will be making losses or profits respectively. in teh long run however due to the absence of barriers to entry new firms will enter or exit depending on the profits meaning that the short run price will be formulated where marginal costs and marginal revenues equal to zero.
plot your supply line, plot your demand line. the intersection is the equilibrium point.
It is where supply and demand meet. It is the price/quantity that suppliers have no reason to make more, and purchasers have no reason to buy more.
in equilibrium, supply=demand you can use this formula
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