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Equilibrium
A free-market equalibrium is when supply and demand are in balance. At the equilibrium price, the quantity that buyers are willing to buy exactly matches the quantity that sellers are willing to sell. So everybody is satisfied, unlike when there is disequilibrium. In classical economics, it is assumed that markets always tend towards equilibrium and return to it in the event that something causes a temporary disequilibrium. General equilibrium is when supply and demand are balanced simultaneously in all the markets in an economy. Keynes questioned whether the economy always moved to equilibrium, for instance, to ensure full employment.
To move the market towards equalibrium, firms can manipulate price or quantity.
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- Part of Speech: noun
- Synonym(s):
- Blossary:
- Industry/Domain: Economy
- Category: Economics
- Company: The Economist
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