Karthikeyan

🔹 1. Market Equilibrium

Market equilibrium is the situation where:

• Quantity demanded = Quantity supplied

• There is no shortage

• There is no surplus

At this point:

• The price is called the equilibrium price (or market clearing price).

• The quantity traded is called the equilibrium quantity.

👉 This is the most efficient point in the market because buyers and sellers are satisfied.

🔹 2. Market Disequilibrium

Market disequilibrium happens when:

• Quantity demanded ≠ Quantity supplied

This causes inefficiency in the market.

There are two types of disequilibrium:

🚨 A. Shortage (Excess Demand)

A shortage occurs when:

• Price is below the equilibrium price

• Demand > Supply

At a low price:

• Consumers want to buy more (Qd)

• Producers supply less (Qs)

• So, Qd > Qs

🔺 What happens next?

Because too many people want the product:

• Sellers increase the price

• Price rises back toward the equilibrium price

📦 B. Surplus (Excess Supply)

A surplus occurs when:

• Price is above the equilibrium price

• Supply > Demand

At a high price:

• Producers supply more (Qs)

• Consumers demand less (Qd)

• So, Qs > Qd

🔻 What happens next?

Because there are unsold goods:

• Firms reduce prices

• Price falls back toward the equilibrium price

💡 Real-life examples:

• 🎄 Christmas cards become cheaper after December 25

• 👕 Summer clothes go on sale in autumn

This happens because firms want to sell leftover stock.