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Economic Equilibrium

It is in the subject matter of economics that the term economic equilibrium is being widely used to refer to a definite situation in the present day world. The situation is such that the forces that work in the economy are balanced out in a perfect manner. As a result of this even if there is an absence of peripheral affect the worth of equilibrium of those economic variables would not really change. The economic equilibrium in the context of market conditions refer to a situation in which the price of the market is being ascertained through the process of competition. This would lead to a situation in which the sum of those services and goods that are required by the buyers is seen to be equivalent to the actual quantity of goods and services that are being generated by the sellers. Such type of price is popularly known as the clearing price of the market or even the price of equilibrium. This kind of price would not be liable to change unless there is a change in the supply system or demand.

There are some properties of economic equilibrium. A surplus is caused in the market of supply when the price crosses the point of equilibrium. And a shortage in the supply system is caused when the price turns out to be below the point of equilibrium. There are separate points of economic equilibrium for different curves of supply and other different curves of demand. The supply and demand remains to be static in a market that is characterized by microeconomic system. In such a kind of market, what can be found is an equilibrium which is of static nature. It has been found that in non-market relationships also economic equilibrium could also be found and this economic equilibrium can be dynamic in nature. In some other situations economic equilibrium can also be general and even multi-market in nature. This kind of economic equilibrium is opposed to the equilibrium of partial type of a market which is of single type.

The term economic equilibrium would simply mean a certain kind of balance in regard to every kind of system for which it is being used. So when there is a question of two different kinds of forces such as supply and demand, an increase in the supply chain would lead to a disruption of the equilibrium. As a result of this, it would only lead to a condition where the prices would turn out to be much less. Therefore the market would be characterized by a unique kind of economic equilibrium.

Economic equilibrium can only turn out to be stable if there is a deviation of a secondary nature from the balanced status and only if it can be achieved. Such a balanced status helps in directing the forces of the economy. Thus this would help out in leading the forces of economy to turn around a sub-system of the economy into such a position which would be characterized by unusual equilibrium.

Tags: Economics, market, price

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