Market equilibrium is a state in which the supply of goods or services matches the demand, resulting in stable prices
. In a competitive market, the equilibrium price is the point where the quantity demanded and supplied are equal
. At this equilibrium point, there is no shortage or surplus, and buyers can buy the quantity they want to buy at the market price
. Key characteristics of market equilibrium include:
- Consistent behavior of agents: The behavior of agents in the market is consistent, and there is no incentive for them to change their behavior
- No incentives to change behavior: In a market in equilibrium, there is no reason for buyers or sellers to alter their actions
- Dynamic process: Equilibrium is a result of the interaction between supply and demand, which is constantly changing
Markets tend to move towards equilibrium unless there are barriers, such as price controls, that prevent them from reaching this state
. In a competitive market, the equilibrium price is determined by the intersection of the supply and demand curves, and the equilibrium quantity is the point where these curves intersect
