Explain the concept of equilibrium
Share
Explain the concept of equilibrium
Sign Up to our social questions and Answers Engine to ask questions, answer people’s questions, and connect with other people.
Login to our social questions & Answers Engine to ask questions answer people’s questions & connect with other people.
Answer:
Equilibrium is the state in which market supply and demand balance each other, and as a result prices become stable. Generally, an over-supply of goods or services causes prices to go down, which results in higher demand. The balancing effect of supply and demand results in a state of equilibrium.
Answer:
Understanding Equilibrium
-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.
As proposed by New Keynesian economist Huw Dixon, there are three properties to a state of equilibrium: the behavior of agents is consistent, no agent has an incentive to change its behavior, and equilibrium is the outcome of some dynamic process. Dixon names these principles: equilibrium property 1, equilibrium property 2, and equilibrium property 3, or P1, P2, and P3, respectively.