• Market Equilibrium is the point at which demand and supply forces intersect. The price at which this happens is called the Equilibrium Price.
• The equilibrium is self righting as any price above it would coz an excess supply which will cause the price to fall, similarly any price below it would coz an excess demand which will cause the price to rise till the time equilibrium is reached
• Price Mechanism is the term referred to this self correction of price
• Functions of price mechanism (Invisible Hand):
  • Signal information to the producer and consumer
  • Ration Scarce resources: Price increases (Supply contracted) when demand is greater than supply, therefore cutting demand
  • Price changes give incentive for producers to produce more and consumers to consume more
• A consumer surplus happens when the price consumers pay for a product or service is less than the price they're willing to pay. Consumer surplus is based on the economic theory of marginal utility, which is the additional satisfaction a consumer gains from one more unit of a good or service.
• Producer surplus is the total amount that a producer benefits from producing and selling a quantity of a good at the market price. The total revenue that a producer receives from selling their goods minus the total cost of production equals the producer surplus.

• When a market is in equilibrium it is in a state of allocative efficiency
• Conumer Surplus + Producer Surplus = Social Surplus
• Point of Allocative Efficiency is where demand = supply
• At the point of allocative efficiency community surplus is maximised
• Consumer Surplus = Willingness to Pay Price – Market Price
• Producer Surplus = Market Selling Price – Economic Cost