Demand and Supply - Equilibrium     When the market price is such that the desired quantity demanded and the desired quantity supplied are equal, the market is said to be in equilibrium. In other words, at the equilibrium price there is no shortage or surplus.

    Equilibrium does not mean that everyone is happy with the equilibrium price. Consumers would always like lower prices and producers would always like higher prices. But, at the equilibrium price no one has any reason to change her purchase or production behavior unless something disturbs this equilibrium.

    We will usually use an asterisk (*) to indicate equilibrium price and quantity as in P* and Q*, though other notations are common as well.

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