Social equilibrium refers to a theory that explains market equilibrium as a state of having a dynamic working balance between the interdependent components in the market. On the other hand, private equilibrium refers to a theory that explains market equilibrium based on state demand and supply; it does not consider any interdependent parties outside supply and demand.

The reason why social equilibrium is more preferred to the private equilibrium is that social equilibrium considers the interdependent parts and social cost when determining the market equilibrium. On the other side, the private market equilibrium does not consider the factors. Thus, the social market equilibrium is likely to give a perfect market equilibrium than private equilibrium.