Why do businesses sek an equilibrium price
Businesses seek an equilibrium price because it allows them to maximize their profits. The equilibrium price is determined by the intersection of supply and demand curves, where the quantity demanded equals the quantity supplied. At this price, businesses can find a balance between selling their goods or services at a price that customers are willing to pay, while still covering their production costs and making a reasonable profit.
If a business sets a price above the equilibrium price, they risk having excess supply and unsold inventory, as customers may not be willing to pay that high price. On the other hand, if a business sets a price below the equilibrium price, they may experience excess demand or shortage, limiting their profit potential. Therefore, seeking an equilibrium price helps businesses avoid situations of surplus or shortage and ensures they capture the maximum number of customers while still making a profit.