What is the Equilibrium Wage?

At equilibrium, the quantity supplied and the quantity demanded are equal. Thus, every employer who wants to hire at this equilibrium wage can find a willing worker, and every nurse who wants to work at this equilibrium salary can find a job. 

The supply curve (S) and demand curve (D) intersect at the equilibrium point (E). 

Many markets contain closely related products that differ in quality. Even in such cases, discussing the average price can still be useful because it reflects what is happening in most of the submarkets.

When the price of labor is not at the equilibrium, economic incentives tend to move salaries toward the equilibrium. 

 At that above- equilibrium salary, excess supply or a surplus results. In a situation of excess supply in the labor market, with many applicants for every job opening, employers will have an incentive to offer lower wages than they otherwise would have. 

In contrast, if the salary is below the equilibrium then a situation of excess demand or a shortage arises. 

 In response to the shortage, some employers will offer higher pay to attract employees. Other employers will have to match the higher pay to keep their own employees. The higher salaries will encourage more employees to train or work. Again, price and quantity in the labor market will move toward equilibrium.