Hi Nupur,
As the name suggests, equilibrium is where things are in balance. In economics, balance is where the cost of producing one additional unit is equal to the revenue realized from its sale. Any point before or after is out of equilibrium as one of the two would be out of the equilibrium.
If you were to draw a perpendicular line from the X-axis all the way up to the point to the demand curve, that is where the final quantity would produce total revenue. If you draw a curve representing Average Revenue, the area parallels to the X-axis from the intersection of that point and upwards will represent the economic profit from that level of production. (I have used Monopolistic competitions' example as it has different scenarios for cost and revenue. In case of perfect competition, MR=AR=P. Hence things are much simpler)
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Harjjeet Gahla (ACS LLB DBF ADM)
FInancial Controller / Accountant
Calgary Alberta
Canada
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Original Message:
Sent: 04-02-2021 10:51 AM
From: Nupur Mahajan
Subject: Equilibrium - Pricing Strategies Part 2
Is equilibrium price and quantity where demand curve intersects with supply curve? Or, is it the point where marginal revenue equals marginal cost?
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Nupur Mahajan
<maskemail>nupur1188@...</maskemail>
Hartford CT United States
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