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Hello, my wall here will be showing, and teaching you about equilibrium. You will be learning about what causes it, changes it, and what it is.

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The result of the interaction between consumers and producers in a competitive market determines Supply and Demand equilibrium, price and quantity.

Market forces tend to drop the price if quantity supplied exceeds quantity demanded and prices rise if quantity demanded exceeds quantity supplied. This movement continues until there are no more changes, and quantity demanded equals quantity supplied. This end result is the market equilibrium.

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Supply and Demand Equilibrium | Intelligent Economist

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The result of the interaction between consumers and producers in a competitive market determines Supply and Demand equilibrium, price and quantity. Market forces tend to drop the price if quantity supplied exceeds quantity demanded and prices rise if quantity demanded exceeds quantity supplied.

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When a market is above the equilibrium it means there is a surplus, which means there is more supply then demand. An example of market equilibrium would be for example selling flat screen tvs, lets say you're selling them at $2,500 but you end up getting a lot of extra stock sitting in the warehouse. So then you would lower the price to raise the quantity demanded. Then lower production rate (Quantity supplied) so you get rid of your surplus, and then you would eventually start to sell about as much product as you make. At that point you have reached equilibrium. This website gives you a decent idea of what Equilibrium is and a good example, which is why I decided to use it.

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Definition of Market Equilibrium

Market equilibrium is a market state where the supply in the market is equal to the demand in the market. The equilibrium price is the price of a good or service when the supply of it is equal to the demand for it in the market. If a market is at equilibrium, the price will not change unless an external factor changes the supply or demand, which results in a disruption of the equilibrium.

Supply, Demand & Equilibrium

If a market is not at equilibrium, market forces tend to move it to equilibrium. Let's break this concept down.

If the market price is above the equilibrium value, there is an excess supply in the market (a surplus), which means there is more supply than demand. In this situation, sellers will tend to reduce the price of their good or service to clear their inventories. They probably will also slow down their production or stop ordering new inventory. The lower price entices more people to buy, which will reduce the supply further. This process will result in demand increasing and supply decreasing until the market price equals the equilibrium price.

If the market price is below the equilibrium value, then there is excess in demand (supply shortage). In this case, buyers will bid up the price of the good or service in order to obtain the good or service in short supply. As the price goes up, some buyers will quit trying because they don't want to, or can't, pay the higher price. Additionally, sellers, more than happy to see the demand, will start to supply more of it. Eventually, the upward pressure on price and supply will stabilize at market equilibrium.

Examples of Market Equilibrium

Flat Screen TVs

Imagine that you make flat screen televisions. Your flagship model is a 72-inch plasma that currently wholesales to your retailers at $2,500. Unfortunately, your warehouse has recently been filling a bit too quickly with 72-inch plasmas. This is probably because each of your three largest competitors has finally gotten around to introducing their own 72-inch televisions, which means that there are a bunch more 72-inch televisions on the market. You decide to lower your wholesale price to $2,250 and see what happens. You also decide to cut production down by 25% for the next month to clear out existing inventory.

When you reviewed the numbers at the end of the month, the price reduction did work, but not quite well enough. So you decide to reduce the wholesale price once again to $2,100 and keep production at the same level. When you reviewed the numbers at the end of the month, you see that you barely have any inventory and the purchase orders from your retailers have started to go up a bit. In the following months, orders have kept up with production and inventory is where it is suppose to be. It appears that the price for your television has reached market equilibrium.

Gas Prices

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market equilibrium in economics: definition & examples - video & lesson transcript | study.com

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Market Equilibrium in Economics: Definition & Examples - Video & Lesson Transcript | Study.com

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Market equilibrium is a market state where the supply in the market is equal to the demand in the market. The equilibrium price is the price of a good or service when the supply of it is equal to the demand for it in the market.

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This video gives an explanation of what Equilibrium is, and how you reach it, while giving apples as an example. It discusses how as the price is cheap the demand for the apples would rise, and the quantity demanded would potentially be higher then the quantity supplied, and as you rise, and if you raise your price due to a larger volume of consumers purchasing the products, the demand will start to decrease as well due to it becoming not as affordable. Then they might be left with a surplus of unsold products as the quantity demanded would be less then the Quantity supplied. To combat this, the price would then be dropped to encourage the sale of the surplus of products, and seeing as there is a surplus, they will start to decrease the quantity supplied as well. The equilibrium is when the price is slightly increased, so the quantity demanded would be slightly lower, but not so high that you loose too much of the demand. It would be at a point where it is at an Equilibrium so the quantity supplied meets the quantity demanded, as the price rises, the quantity demanded lowers, as the price lowers the quantity demanded rises. This video was chosen as it gives a good introduction on what Equilibrium does, and how it is achieved.

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Equilibrium price and quantity for supply and demand

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This video talks about the cause and factors that would change the Equilibrium. Using apples again as an example,  if lets say there was apple created that was disease resistant, it would increase the quantity supplied because there would be less supplies lost, and due to less supplies lost it would cost less to produce, so the price would drop, so as both supplies increasing and the price dropping, this would account for the quantity demanded rising as well, and we would have a new Equilibrium. Another scenario, lets say that a study was put out showing there are benefits from using the product, then the quantity supplied would increase, and then the price would also increase as well as the quantity supplied, creating a new equilibrium. Another scenario, is a new product comes around, which is advertised and consumers might start buying more of this new product, so then the price and quantity of apples will go down as the quantity demanded will be less, and the quantity supplied will also go down so as not to gain a surplus. Which will again effect the equilibrium. One more scenario could be that the employees had to be given a pay raise, so this would cause the Quantity supplied to decrease, and because there would be less product, the producers would raise the price to get more for their product, and as it gets higher the supply demanded will drop, meeting the quantity supplied. And there will be yet another new equilibrium. I chose this video because it gives multiple clear examples and scenarios which explain how and why equilibrium in markets change.

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This is a more detailed representation of the supply and demand changes which lead to changes in the equilibrium

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This image shows the rise and fall of demand as well as the rise and fall of the quantity, and shows specifically the middle point where the two lines meet. This point is called the Equilibrium.

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1) I learned about how each of the different factors affected the other, and how at prices which get too high, there is more likely to be a large surplus as people tend to buy other things instead and about how each factor changing decides whether its higher or above the equilibrium.
2)This is interesting, because if I ever get into a career/job where I own a manufacturing business, this will give me the right idea on how to run it properly and keep in the equilibrium which is most profitable for me.
3) Make sure I tell them what factors to take into account so they know how to keep a business in equilibrium state.