Price determination
market equilibrium
market equilibrium means the point where demand and supply are equal. At this point, the price is just right — no shortage and no extra goods. This price is called the equilibrium price, and the amount bought and sold is the equilibrium quantity.
Market disequilibrium
market disequilibrium happens when demand and supply aren’t equal. This causes shortages or surpluses.
If the price is too low, more people want to buy than what’s available — this creates a shortage. When that happens, prices usually rise until they reach the equilibrium price again.
Surpluses
when the price is too high, sellers produce more than buyers want — this creates a surplus. To sell the extra goods, firms lower the price until it reaches the equilibrium price again. That’s why things like Christmas cards or summer clothes get cheaper after the season ends.
