If the supply meets exactly one another with the demand of a product, there is a market balance. Such a market equilibrium is often shown in a graphical representation. Here one can see the level of market equilibrium at the interface between supply and demand curves. The market equilibrium is, of course, generally the optimum state of a market, since neither a supply transition nor a surplus demand prevails. From this equilibrium, on the one hand, the equilibrium quantities and, on the other hand, the equilibrium rate can be deduced.
Path to market equilibrium
Of course, not every market is constantly in the market balance. After all, on the real market, there are constant fluctuations in supply as well as in demand. For this reason, it may take some time for the market equilibrium of a product to settle. This leveling is achieved by ongoing adjustments by both consumers and suppliers. Companies have the opportunity, for example, to achieve market equilibrium through price adjustments. Consumers, on the other hand, can, for example, buy on stock and thus also contribute to the equilibrium of the market.
Determination of market equilibrium
In order to be able to determine market equilibrium, on the one hand, the so-called equilibrium price and, on the other hand, the so-called equilibrium quantity. But what is the equilibrium or the equilibrium quantity?
As the name implies, the market is in equilibrium in terms of equilibrium. The offered and requested quantity of a particular good is therefore identical. There is neither a supply nor a demand surplus.
Just as with the equilibrium quantity, the equilibrium point is a state of equilibrium in the market. When looking at the equilibrium price, one should keep in mind that a supplier always strives to get the highest possible price for a product and sell many products. The customer, on the other hand, would like to buy more, the cheaper the price is ultimately. Even at the equilibrium price it is assumed that there is neither a supply nor a demand surplus. The state of the equilibrium price must, of course, be achieved by means of protracted settling on the market.