 So, if you've hung in with me this far, now we're going to get to the fun stuff. The whole reason that I walk so slowly and methodically through what demand really is, and then what supply really is, is that once we've gotten that far and we've laid the foundation, it should be a lot easier for you to use these concepts simultaneously to start talking about the really interesting stuff. So, for right now, let's talk about what we mean when we say the market clearing price. So, the market clearing price, or what's often called the equilibrium price, is that price at which the quantity supplied equals the quantity demanded. And the reason that's so special is that now, if we have a bit of a theory about what happens in the marketplace, so here it's not just drawing supply and demand, but now we're going to have a theory about how things react, most economists would say that at the market price, there's no reason for the price to move away from that point, the market clearing price, or what's often just called the market price, okay? So, in our example, it was at $2.50, $2.50 for a gallon of gasoline, because at that price, the quantity supplied is 36 gallons and the quantity demanded is also 36 gallons. Now, to understand why that's so special, let's see what would happen if we moved away from that. So, suppose the price were higher, suppose for some reason, the price were $4 for a gallon of gasoline. Well, using the framework and the numbers we've already built up to this point, we could say, okay, at $4 a gallon, the quantity supplied of gasoline is 155 gallons, but the quantity demanded is only 20. So, that means we have what's called a surplus of 135 gallons. At the price of $4, the supply side, or the producers collectively, are trying to sell 135 gallons for which there are no corresponding buyers. So, what's going to happen when we often say that there's a glut, that's another synonym for a surplus in economics jargon, and so here, the theory that comes into play is to say, well, in a typical market, if there's a surplus or a glut, the sellers will lower their prices to try to get rid of this glut, because they've got a bunch of inventory that they want to sell, and they can't at that price, because they can't find buyers for those units, those excess units, and so they're going to lower the price. Okay, so the idea is, in this market, if the price is above $250, you're going to have a surplus. And so we would expect there to be a force in the marketplace pushing prices down if they should be above $250. On the other hand, what if they're below $250? Let's say, for example, what if they're $1? Well, at $1, the quantity supplied is zero, and the quantity demanded is 57. So here, there's what's called a shortage of 57 gallons. At that price, people in the marketplace collectively want to buy 57 gallons worth of gasoline, but nobody wants to sell even a single gallon. And so those buyers are frustrated. So what do they do? Well, now, again, here we have a theory. We say that they're going to try to bid up the price. Or if you prefer, if you want to say, well, it's really the seller setting the price, okay, you can say the sellers are going to see that there's people lined up with money anxiously trying to buy gasoline, and the sellers are saying, yeah, but we don't want to sell any in a dollar a gallon. And so they say, well, maybe we should try charging more. Let's see if they'll still buy if we charge more. Okay, so in general, the idea is if the price is too low, such that there's a shortage that we would expect forces to push the price up. So only at the market clearing or the equilibrium price is there no reason for it to move one way or the other, that at that price, quantity demanded equals quantity supplied. Now, we should be clear to say that at $250, people get as much gasoline as they want and producers sell as many gallons as they want. Those are technically true statements, but don't be misled by them. Obviously, consumers would always rather get more gallons of gasoline so long as it were at a lower price or free. Because what we mean when we talk about how many gallons producers want to sell and how many gallons consumers want to buy, we always mean holding everything else equal and with the particular price that we're talking about. So the market equilibrium price, it's not that that's some optimal ideal state of the world in some abstract sense, the motorist might be really upset. A lot of people might not even be driving, they might be walking to work if gasoline happens to be really expensive or they just really don't have a lot of money. So it's not necessarily that those people are happy with the outcome in general, but the point is what's special about the market clearing price for gasoline is that's the price at which there's neither a surplus nor a shortage. And so there's no reason for the price to be pushed one way or the other. So that's also why it's an equilibrium, equilibrium meaning stable. So the idea is that the price should ever get to be 250, there would be nothing internal to this discussion or analysis that would push the price away from that level. Whereas if the price is anything other than 250, you don't even need to give me any more information. I can just tell you that's not a stable resting point for the market price of gas. It's going to move around. If it's too high, it's going to get pushed down. If it's too low, it's going to get pushed up. Okay, so that's the idea of how you interact, supply and demand with each other to say what the market clearing price is. And I've also supplemented it with a discussion about why we would expect an and normally functioning market for the price to move towards the market clearing level.