what it meant by equilibrium in economics?how equilibirum attained?
The following site has an ok defintion.
(I cannot post the site: instead google economics, equilibrium, definition)
Market equilibrium occurs when buyers and sellers, each acting in their own best interest, arrive at a "solution" with respect to price and quantity and there is no immediate pressure to change. Both buyers and sellers accept that they cannot do any better buy doing something else.
To understand equilibrium in economics, it is helpful to first understand the concept of supply and demand. In a market, the supply represents the quantity of a good or service that sellers are willing to provide at a certain price, while the demand represents the quantity of that good or service that buyers are willing to purchase at a certain price.
Equilibrium occurs when the quantity supplied equals the quantity demanded, resulting in a balance between the two forces. At this point, there is no immediate pressure for the price or quantity to change. Equilibrium is often represented graphically by the intersection of the supply and demand curves.
So, how is equilibrium attained? It is a result of the continuous interaction between buyers and sellers in a market. Initially, the market may not be in equilibrium, with either excess supply or excess demand present.
If there is excess supply, meaning that the quantity supplied exceeds the quantity demanded, sellers may be motivated to lower the price to sell more of the product. As the price decreases, the quantity demanded increases, and eventually, the market reaches a point where the quantity supplied equals the quantity demanded, leading to equilibrium.
On the other hand, if there is excess demand, meaning that the quantity demanded exceeds the quantity supplied, buyers may be motivated to offer higher prices to secure the product. As the price increases, the quantity supplied increases, and eventually, the market reaches a point where the quantity supplied equals the quantity demanded, again reaching equilibrium.
The process of supply and demand constantly adjusting until equilibrium is reached is a fundamental principle in economics. It demonstrates how markets self-regulate to find a balance between what sellers are willing to provide and what buyers are willing to purchase.