Question

When is market said to be in a state of equilibrium?

Answer 1

A market is said to be in a state of equilibrium when the quantity demanded of a commodity is equal to the quantity supplied at a particular price. This price is called the equilibrium price.

At this price:

• There is no excess demand or excess supply.

• There is no unsold stock in the market.

• Both buyers and sellers are satisfied, so there is no tendency to change the price or quantity.

Thus, the equilibrium price clears the market, and there is stability in terms of demand, supply, and price.