A market clearing price is the price of a good or service at which the quantity supplied is equal to the quantity demanded. This equilibrium is a basic concept in economic theory, where the market reaches a balance with no excess supply or shortage of the product.
In economic terms, the market clearing price is also referred to as the equilibrium price. At this price, producers are willing to supply exactly the amount that consumers wish to purchase. When prices are above the market clearing price, excess supply occurs, putting downward pressure on prices. Conversely, when prices fall below this equilibrium, demand exceeds supply, driving prices upward until balance is restored.
In Life Cycle Assessment and cost-benefit analysis, understanding market clearing prices is essential for accurate economic modelling. These prices reflect the true economic value of products and services in competitive markets. When conducting consequential LCA studies that model changes in production systems, market clearing prices help determine which activities will respond to changes in demand and how prices might adjust as production volumes shift.
As Chief Operating Officer, Iris leads our organisational development and oversees day-to-day operations. Before joining 2-0, she worked in the biotechnology sector. As an LCA consultant, Iris has devoted her expertise primarily to the domains of sustainable agriculture and food production. She is dedicated to teaching LCA and is responsible for our educational efforts. Iris holds an M.Sc. in Biology – Biotechnology from the University of Copenhagen.
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Glossary terms are clearer once you have seen them applied. Our guide to what LCA is and how it works walks through the complete methodology: goal and scope, inventory modelling, impact assessment, and interpretation.
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