Written by 9:04 am Science

What Divergences Arise Between Equilibrium ?

The equilibrium price is the price at which the quantity supplied equals the quantity demanded. The equilibrium quantity is the number of units that sellers wish to sell and buyers wish to buy at a particular price.

A deviation from equilibrium occurs when there are more or fewer units sold than desired at that price. For example, if there are 10 units supplied and 10 units demanded at $5 per unit, then there is no deviation from equilibrium because both sides of the market are satisfied with the price. If there are 11 units supplied but only 9 demanded, then there is a surplus in supply (11 − 9) − 9 = 2 units. This surplus will probably cause sellers to lower their asking prices until supply equals demand again.

When supply exceeds demand, we have an excess supply (more goods are being supplied than are demanded). When demand exceeds supply, we have an excess demand (more goods are being demanded than are supplied).

There may also be a shortage in supply or demand. This happens when there is less of something available than people want to buy or sell at some given price level; this shortage causes prices for that good or service to rise until both sides of the equation are satisfied.

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Last modified: August 16, 2022