The Meaning Of Market Equilibrium

After you have worked through this section of the learning unit, you should be able to:

  • describe the concept market equilibrium with the aid of demand and supply curves

In a competitive market, the market price is set by the interaction of the forces of demand and supply, and at such a level, that the quantity demanded is equal to the quantity supplied. This is referred to as the equilibrium price and once this price is reached, we have market equilibrium. At this market equilibrium price, the plans of the buyers match the plans of the sellers.

Watch the following clip on the meaning of equilibrium:

An equilibrium position indicates a position of rest, because the behaviour of both buyers and suppliers is unchanging (at rest). At an equilibrium price, buyers are able to purchase the quantity of a product they plan to buy, and suppliers are supplying the quantity of a product they plan to supply.

Watch the following video clip on the concept of market equilibrium: