Market Equilibrium

Equilibrium means ‘at rest’ or ‘a state of balance’ - i.e. a situation where there is no tendency for change. The concept is used in both microeconomics (e.g. equilibrium prices in a market) and also in macroeconomics (e.g. equilibrium national income).

Market equilibrium is a state in which the quantity of a good or service that is being supplied is equal to the quantity that is being demanded by consumers at the current price. This means that there is no excess supply or excess demand for the good or service, and the market is in balance. Market equilibrium is an important concept in economics, as it represents the point at which the forces of supply and demand are in balance and the market is operating efficiently.

Market equilibrium can be affected by a variety of factors, including changes in consumer demand, changes in the price of related goods or services, and shifts in the availability of resources or technology. When the market is not in equilibrium, the price of the good or service will tend to adjust in order to bring the market back into balance. For example, if there is excess demand for a good, the price of the good will tend to increase, while if there is excess supply, the price will tend to decrease.

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