Note: This is the fourth post in a weekly video series on basic microeconomics.
Now that we know what the supply and demand curves are we can put them together to understand how they affect prices.
In this video from Marginal Revolution University, we learn how prices reach equilibrium and how the market works like an invisible hand coordinating economic activity. We also discover why at equilibrium the price is stable and gains from trade are maximized, and why when the price is not at equilibrium, a shortage or a surplus occurs.
(If you find the pace of the videos too slow, I’d recommend watching them at 1.5 to 2 times the speed. You can adjust the speed at which the video plays by clicking on “Settings” (the gear symbol) and changing “Speed” from normal to 1.25, 1.5 or 2.)
Previous in series: How to understand the supply curve