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Equilibrium Price:

As demand curve reflects the price-quantity relationship and shows different pairs of price-quantity favored by the consumers. Likewise the supply curve shows the preferences of firms for various pairs of price-quantity. The preferences of consumers (i.e., buyers) and firms (i.e., sellers) are divergent to each other. It is as well apparent adequate from the shape of demand and supply curves. What will be the real price charged and quantity sold in a specific market?

There is just one price at which the preferences of sellers and buyers meet altogether. At that point the quantity required of a commodity by the buyer is equal to the quantity the seller is eager to sell. This price is termed as the equilibrium price and it takes place at the point of intersection of the supply curve and demand curve. In another words, equilibrium refers to a specific pair of prices and quantity. The supply and demand will be in equilibrium balance.

Equilibrium in common is stated as the state of rest or balance from which there is no tendency for modification. In economics, equilibrium usually refers to equilibrium in a market. Even when there is any modification, the original equilibrium place will be restored by market forces. The idea of equilibrium is too applied to explain and understand other sub-systems of the economy such as industry, agriculture, growth & distribution.

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  • Lindahl Equilibrium
  • Intertemporal Equilibrium
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