Middlemen exist to promote the value of trade and hence increase the amount of value created. Middlement do this by reducing the transactions costs incurred by buyers and sellers. The reduction in transactions costs creates more mutually beneficial exchanges. Use a graph to illustrate and explain market equilibrium. Use the graph to indicate economic efficiency.
Market equilibrium is at the intersection of the supply and demand curves.
At this intersection the quantity supplied equals the quantity demanded. All buyers are able to find sellers and all sellers are able to find buyers. When the price is above the equilibrium price, the quantity supplied will exceed the quantity demanded. The excess supply results in unsold inventories. Sellers have sales and cut the price to eliminate the inventories.