Market equilibrium is the state in which market supply and demand balance each other, resulting in stable prices. It occurs when the quantity of goods supplied equals the quantity demanded, eliminating any excess supply or shortage.

Market Equilibrium

Market equilibrium

Market supply refers to the total quantity of a good or service that producers in a market are willing and able to sell at a given price over a specific period. It is influenced by factors such as production costs, technological advancements, and the number of suppliers in the market.

market supply

Market demand refers to the total quantity of a good or service that all consumers in a market are willing and able to purchase at various prices over a given period. It is influenced by factors such as consumer preferences, income levels, prices of related goods, and future expectations.

Market Demand

stable prices

quantity of goods supplied

quantity demanded

Excess supply occurs when the quantity of a good or service supplied exceeds the quantity demanded at the current price, often leading to downward pressure on prices. This imbalance can result from factors such as overproduction, decreased consumer demand, or price floors set above equilibrium price levels.

excess supply

A shortage occurs when the demand for a product or service exceeds its supply in a market, often leading to increased prices and potential market inefficiencies. It can result from various factors, including production disruptions, regulatory constraints, or sudden spikes in demand.

shortage

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