Define the equilibrium of a market

Marketing Jan 12, 2021

Define the equilibrium of a market. Describe the force that moves a market towards its equilibrium.

Expert Solution

The equilibrium of a market occurs where supply is equal to demand. If price is below equilibrium, then quantity demanded is greater than quantity supplied. People who want to buy the good can't and this leads to upward pressure on the price towards the equilibrium. If price is above equilibrium, quantity supplied is greater than quantity demanded. There are goods left on the shelf. In order to sell these goods, firms have to reduce prices. There is downward pressure on the price towards the equilibrium.

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