Explain equilibrium in points
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Explanation:
Equilibrium is the state in which market supply and demand balance each other, and as a result prices become stable. Generally, an over-supply of goods or services causes prices to go down, which results in higher demand—while an under-supply or shortage causes prices to go up resulting in less demand.
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What Is Equilibrium?
Equilibrium is the state in which market supply and demand balance each other, and as a result prices become stable. Generally, an over-supply of goods or services causes prices to go down, which results in higher demand—while an under-supply or shortage causes prices to go up resulting in less demand. The balancing effect of supply and demand results in a state of equilibrium.
KEY TAKEAWAYS
A market is said to have reached equilibrium price when the supply of goods matches demand.
A market in equilibrium demonstrates three characteristics: the behavior of agents is consistent, there are no incentives for agents to change behavior, and a dynamic process governs equilibrium outcome.
Disequilibrium is the opposite of equilibrium and it is characterized by changes in conditions that affect market equilibrium.
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