<P> A market - clearing price is the price of a good or service at which quantity supplied is equal to quantity demanded , also called the equilibrium price . The theory claims that markets tend to move toward this price . For a one - time sale of goods , supply is fixed , so the market - clearing price is simply the price at which all items can be sold , but no lower . ( Demand can be adjusted by setting the price appropriately , perhaps through an auction mechanism . ) In this case , the marketplace is literally cleared of all goods . For a market where goods are produced and sold on an ongoing basis , the theory predicts that the market will move toward a price where the quantity supplied in a broad time period will equal the quantity demanded . This might be measured over a period like a week , month or year , to smooth out irregularities caused by manufacturing in batches , and delivery schedules ; sellers often have a buffer of inventory , so that products are always available for retail sale . </P>
the equilibrium price clears the market it is the price at which
quantity supplied is equal to quantity demanded