Why do business seek and equilibrium price ?
Businesses seek an equilibrium price in order to maximize profits and ensure market stability. An equilibrium price is the price at which the quantity of goods or services demanded by consumers is equal to the quantity supplied by producers. At this price level, there is no shortage or surplus of goods in the market, leading to a balance between supply and demand.
By determining and achieving an equilibrium price, businesses can optimize their sales and revenue, as they are able to sell the maximum quantity of goods at the highest possible price. This helps businesses to cover their costs, generate profits, and remain competitive in the market.
Additionally, an equilibrium price helps to prevent price wars and fluctuations in the market, as it provides a stable pricing environment for both producers and consumers. This stability can benefit businesses by building customer trust and loyalty, as well as reducing uncertainty and risk in their operations.
Overall, seeking an equilibrium price allows businesses to achieve efficiency, profitability, and market sustainability.