Market equilibrium
Definition
The point at which the quantity of a good or service demanded by buyers equals the quantity supplied by sellers, resulting in a stable market price. When the market is not at equilibrium, surpluses or shortages push the price toward the equilibrium point.
Examples
- If too many apartments are available and few renters want them, landlords lower rents until the market balances
- When a new smartphone launches with limited supply, high demand drives prices up until equilibrium is reached
- The price of gasoline adjusting seasonally as summer driving increases demand
Study This Concept
Practice market equilibrium with free review games in these units: