equilibrium

Examples of equilibrium in the following topics:

• Macroeconomic Equilibrium

  • In economics, the macroeconomic equilibrium is a state where aggregate supply equals aggregate demand.
  • In economics, equilibrium is a state where economic forces (supply and demand) are balanced.
  • Without any external influences, price and quantity will remain at the equilibrium value .
  • The result is the economic equilibrium for that good or service.
  • Similar to microeconomic equilibrium, the macroeconomic equilibrium is the point at which the aggregate supply intersects the aggregate demand.

• The Equilibrium Interest Rate

  • In a economy, equilibrium is reached when the supply of money is equal to the demand for money.
  • Equilibrium is reached when the supply of money is equal to the demand for money.
  • Changes in expectations will therefore affect the equilibrium interest rate.
  • In economics, equilibrium is a state where economic forces such as supply and demand are balanced and without external influences, the equilibrium will stay the same.
  • Use the concept of market equilibrium to explain changes in the interest rate and money supply

• Equilibrium

  • Equilibrium as "a point from which there is no endogenous ‘tendency to change'
  • There are no forces (from buyers or sellers) that will alter the equilibrium price or equilibrium quantity.
  • This is a mechanical, static conception of equilibrium.
  • General equilibrium is a condition where all agents acting in all markets are in equilibrium at the same time.
  • Neoclassical microeconomics tends to focus on partial equilibrium.

• Aggregate Expenditure at Economic Equilibrium

  • An economy is said to be at equilibrium when aggregate expenditure is equal to the aggregate supply (production) in the economy.
  • Classical economics assumes that the economy works on a full-employment equilibrium, which is not always true.
  • In reality, many economists argue that the economy operates at an under-employment equilibrium.
  • In this graph, equilibrium is reached when the total demand (AD) equals the total amount of output (Y).
  • The equilibrium point is where the blue line intersects with the black line.

• Introduction to Demand and Supply in a Market System

  • The economic analysis that is used to analyze the overall equilibrium that results from the interrelationships of all markets is called a "general equilibrium" approach.
  • Partial equilibrium is the analysis of the equilibrium conditions in a single market (or a select subset of markets in a market system).
  • In principles of economics, most models deal with partial equilibrium.
  • In a partial equilibrium model, usually the process of a single market is considered.

• Long Run Market Equilibrium

  • The long-run equilibrium of a perfectly competitive market occurs when marginal revenue equals marginal costs, which is also equal to average total costs.
  • As with any other economic equilibrium, it is defined by demand and supply.
  • In a perfectly competitive market, long-run equilibrium will occur when the marginal costs of production equal the average costs of production which also equals marginal revenue from selling the goods.
  • So the equilibrium will be set, graphically, at a three-way intersection between the demand, marginal cost and average total cost curves.

• Open Economy Equilibrium

  • In an open economy, equilibrium is achieved when no external influences are present; the state of equilibrium between the variables will not change.
  • In an open economy, equilibrium is achieved when supply and demand are balanced .
  • In the case of market equilibrium in an open economy, equilibrium occurs when a market price is established through competition.
  • In an open economy, equilibrium is reached through the price mechanism.
  • The interest rates also adjust to reach equilibrium.

• Clearing the Market at Equilibrium Price and Quantity

  • When a market achieves perfect equilibrium there is no excess supply or demand, which theoretically results in a market clearing.
  • This equilibrium point is represented by the intersection of a downward sloping demand line and an upward sloping supply line, with price as the y-axis and quantity as the x-axis .
  • At perfect equilibrium there is no excess demand (represented by 'A' in the figure) or excess supply (represented by 'B' in the figure), which theoretically results in a market clearing.
  • Even in static markets there is competitive consolidation that allows companies to charge differing price points than that of the equilibrium.
  • The equilibrium point is where market clearing will theoretically occur.

• Market Adjustment to Change

  • A decrease in demand will cause both the equilibrium price and quantity to fall.
  • An increase in supply (while demand is constant) will cause the equilibrium price to decrease and the equilibrium quantity to increase.
  • A decrease in supply will result in an increase is the equilibrium price and a decrease in equilibrium quantity.
  • Should demand decrease and supply increase, both push the equilibrium price down.
  • However, the decrease in demand reduces the equilibrium quantity while the increase in supply pushes the equilibrium quantity up.

• Impacts of Surpluses and Shortages on Market Equilibrium

  • In the analysis of market equilibrium, specifically for pricing and volume determinations, a thorough understanding of the supply and demand inputs is critical to economics.
  • Surpluses and shortages often result in market inefficiencies due to a shifting market equilibrium.
  • Governmental intervention can often create surplus as well, particularly through the utilization of a price floor if it is set at a price above the market equilibrium .
  • A price floor ensures a minimum price is charged for a specific good, often higher than that what the previous market equilibrium determined.
  • Infer the outcomes of departures from equilibrium using the model of supply and demand