what is equilibrium with examples
Answers
Answer:
Definition: Equilibrium refers to the economic situation where supply and demand for a certain good or service in the market is equal, which represents a stable market price to purchase and sell. In other words, consumers are purchasing the same value of goods or services that suppliers are willing to supply at the current, stable market price.
Example
In order for equilibrium to occur, a market should have many companies and customers, selling an identical product. Let’s consider the market for pencils.
Pencils are nondescript objects, bought and sold by a nearly countless number of consumers and companies. The market for pencils would be the closest real-world market in equilibrium, where the demand from buyers and the supply from suppliers are balanced by the equilibrium market price of a pencil.
There is no incentive for consumers to pay more for an identical pencil, and there is no incentive for suppliers to offer less per item if it means selling less units at this equilibrium price. At the market price, demand equals supply for pencils, and the market is as close to equilibrium as can be possible outside of economic theory.
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