Definition Of Market Equilibrium And Disequilibrium
Economics notes
Definition Of Market Equilibrium And Disequilibrium
➡️ Market equilibrium is a state of balance in a market where the quantity of goods supplied is equal to the quantity of goods demanded.
➡️ Disequilibrium is a state of imbalance in a market where the quantity of goods supplied is not equal to the quantity of goods demanded.
➡️ Market equilibrium is a stable state, meaning that any changes in the market will cause it to return to equilibrium.
➡️ Disequilibrium is an unstable state, meaning that any changes in the market will cause it to move away from equilibrium.
➡️ Market equilibrium and disequilibrium are important concepts in economics, as they help to explain how markets work and how prices are determined.
What is market equilibrium and how is it achieved?
Market equilibrium is a state where the quantity of goods or services demanded by consumers is equal to the quantity supplied by producers, resulting in a stable price. It is achieved through the interaction of market forces such as supply and demand, which adjust prices until they reach a point where the quantity demanded equals the quantity supplied.
What is market disequilibrium and what causes it?
Market disequilibrium is a state where the quantity of goods or services demanded by consumers is not equal to the quantity supplied by producers, resulting in an unstable price. It can be caused by various factors such as changes in consumer preferences, shifts in supply or demand curves, government interventions, or external shocks such as natural disasters or wars.
How can market disequilibrium be corrected?
Market disequilibrium can be corrected through various mechanisms such as price adjustments, changes in production or consumption behavior, government policies, or market interventions. For example, if there is excess supply in the market, producers may lower prices to stimulate demand, while if there is excess demand, producers may increase prices to ration supply. Alternatively, the government may impose taxes or subsidies to influence production or consumption patterns, or regulate prices to prevent market failures.