Why do businesses seek aquilibrium price
Businesses seek equilibrium price because it allows them to maximize their profits.
At equilibrium price, the quantity demanded by consumers is equal to the quantity supplied by producers. This means that the market is in a state of balance, where there is neither a shortage nor a surplus of goods or services.
By selling their products at the equilibrium price, businesses can ensure that they are able to sell all the goods they produce. This helps them to avoid excess inventory or having to reduce prices to sell unsold goods, which can hurt their profit margins.
Additionally, selling at the equilibrium price allows businesses to earn the highest possible revenue. If they set a price above the equilibrium price, demand would decrease and they would be unable to sell all their products. On the other hand, if they set a price below the equilibrium price, they could potentially sell more products, but at a lower price, resulting in lower revenue.
Overall, seeking equilibrium price allows businesses to efficiently allocate their resources, match supply with demand, and maximize their profits in a competitive market.