The equilibrium price is where the supply of goods matches demand. When a major index experiences a period of consolidation or sideways momentum, it can be said that the forces of supply and demand are relatively equal and the market is in a state of equilibrium. Economists find that prices tend to fluctuate around the equilibrium levels.
When a market is in equilibrium?
A market is said to be in equilibrium when both the buyers and sellers are willing to exchange a product or service at an equal price. This price is the equilibrium price and its respective quantity is called the equilibrium quantity. The market price of a product can increase, decrease or stay balanced.
What determines the equilibrium price in a competitive market?
In a competitive market, demand for and supply of a good or service determine the equilibrium price. MARKETS: Equilibrium is achieved at the price at which quantities demanded and supplied are equal. We can represent a market in equilibrium in a graph by showing the combined price and quantity at which the supply and demand curves intersect.
