Concept of Equilibrium in Economics

1. In simple words, 'equilibrium' means a state of balance or rest in which there is no tendency to change.
2. It is a situation where opposite forces are equal, so there is no pressure to move away from that position.​

Example: A book resting on a table is in equilibrium because the upward force of the table and the downward force of gravity are equal.

1. In economics, equilibrium is a position where important economic forces (like demand and supply, cost and revenue) are balanced.
2. At equilibrium, there is no tendency for buyers or sellers, or firms or industries, to change their current decisions.

1. A consumer is in equilibrium when, given income and prices, the consumer gets maximum satisfaction and has no reason to rearrange spending.
2. In this position, the consumer does not want to change the quantities of goods purchased.

Example: If a student divides pocket money between snacks and mobile data in such a way that any change would reduce satisfaction, the student is in consumer equilibrium.

1. Firm: A firm is a basic producing unit that organises factors of production to produce a particular commodity or service for sale with the aim of earning profit.​
2. A firm is in equilibrium when it has no tendency to change its level of output because it is already earning maximum possible profit or minimum possible loss at that time.

1. Industry: An industry is a group of firms producing a homogeneous (similar) product, such as all cement firms or all sugar mills.​
2. An industry is in equilibrium when the number of firms in it and the total output produced remain stable, i.e., there is no tendency for new firms to enter or existing firms to leave.​

Real-life analogy:

Think of coaching institutes in a city.

• If existing institutes are earning high profits, more institutes start, so the industry is not yet in equilibrium.
• When profits become normal and no new institutes want to open and no existing one wants to close, the coaching industry in that city is in equilibrium.

1. The equilibrium point is the exact position (output level or number of firms) at which equilibrium is established.
2. As long as underlying conditions (like technology, tastes, and factor prices) do not change, this equilibrium point remains stable.

• Equilibrium means balance or rest, with no tendency to change.
• In economics, equilibrium is applied to consumers, firms, and industries.
• A firm is in equilibrium when it has no tendency to change its output because it is already at maximum profit/minimum loss.
• An industry is in equilibrium when the number of firms is stable and no firm wants to enter or exit.