Market Equilibrium
Definition
Market equilibrium refers to the point where the quantity demanded by buyers equals the quantity supplied by sellers, resulting in a balance between supply and demand in a market.
Analogy
Imagine a seesaw with buyers on one side and sellers on the other. When both sides are balanced, neither group is overpowering the other, representing market equilibrium.
Related terms
Surplus: A situation where the quantity supplied exceeds the quantity demanded, leading to excess supply in the market.
Shortage: A situation where the quantity demanded exceeds the quantity supplied, resulting in insufficient supply in the market.
Price Ceiling: A government-imposed maximum price that prevents prices from rising above a certain level.
"Market Equilibrium" appears in:
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Practice Questions (2)
- Which of the following best defines market equilibrium?
- If there are changes in market equilibrium, how would the market most likely respond?
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