Market Equilibrium and Elasticity

A market is in equilibrium where the quantity demanded equals the quantity supplied. That crossing point sets the market price and quantity, and every IB microeconomics diagram starts there.

Reaching equilibrium

If the price is above equilibrium there is a surplus, so sellers cut the price. If the price is below equilibrium there is a shortage, so the price is bid up. The market moves back to the crossing point on its own.

Price elasticity of demand

Elasticity measures how strongly quantity demanded reacts to a price change. Necessities such as basic food are inelastic. Goods with many substitutes are elastic.

Elasticity decides how a tax or a shift lands. A tax on an inelastic good is paid mostly by the consumer, because quantity barely falls when the price rises.

The Paper approach

Draw supply and demand, label the axes with price and quantity, and mark the equilibrium clearly. Then evaluate: state whether demand is elastic or inelastic and explain how that changes who carries the burden and how much quantity moves. IB rewards the evaluation, not just the diagram.