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Putting It Together: Supply and Demand

So, is it supply or demand that determines the market price of a chocolate bar, or any other good or service for that matter? The answer is "both." Like the two blades of a scissors, supply and demand work together to determine price. Just as a single scissor blade is of little value for cutting, a supply curve or demand curve on its own is not very useful for understanding how markets really work. Both sides of the market—supply and demand—help to explain the market.

When you combine the supply and demand curves, there is a point where they intersect; this point is called market equilibrium. The price at this intersection is the equilibrium price, and the quantity is the equilibrium quantity.

At the equilibrium price, there is no shortage or surplus.