Economic equilibrium
A balanced state where supply and demand forces stabilize.
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It can describe both static situations with unchanging values and dynamic ones where ratios stay constant while quantities grow.[1] Disequilibrium occurs when a market is not in equilibrium, lasting from a brief moment to an extended period.[2] When supply and demand forces are in balance, economic variables stop changing, which defines a state of economic equilibrium.[3][4]
Quick Facts
- Field
- Economics
- Concept type
- Equilibrium
- Examples
- Competitive equilibrium
- monopolist equilibrium
- Nash equilibrium
- Subgame Perfect Equilibrium
- Associated theorists
- Huw Dixon, Antoine Augustin Cournot
Facts from the source article.
Key facts and history
Excess supply leads to price cuts that reduce quantity supplied and increase quantity demanded, abolishing the glut.[5] Excess demand leads to price increases that reduce quantity demanded and increase quantity supplied, ending the shortage.[5] This automatic correction distinguishes markets from central planning, which often suffers persistent shortages.[5] During the Great Famine in Ireland (1845–52), food was exported while people starved because the equilibrium price was above what Irish farmers could afford.[6]
Adam Smith, a classical economist, believed that price adjustments in free markets naturally guide them toward equilibrium.[5] Huw Dixon outlined three general properties that any equilibrium should possess.[7][8]
What the cited sources add
The Open Library record confirms that "Methods of Macroeconomic Dynamics" was published by MIT Press in 2000, supporting the dynamic equilibrium discussion.[9][1] The Open Library record confirms that "Microeconomic analysis" was published by Norton in 1992, supporting the definition of equilibrium.[4][3]
References
- Wikipedia, "Economic equilibrium" (CC BY-SA 4.0), which cites: Turnovsky, "Methods of Macroeconomic Dynamics", MIT Press, 2000 (we also read that source) en.wikipedia.org
- Wikipedia, "Economic equilibrium" (CC BY-SA 4.0), which cites: O'Sullivan, "Economics: Principles in Action", Pearson Prentice Hall, 2003, p. 550 (original not read by us) en.wikipedia.org
- Wikipedia, "Economic equilibrium" (CC BY-SA 4.0), which cites: Varian, "Microeconomic Analysis", Norton, 1992 (we also read that source) en.wikipedia.org
- Open Library record, ISBN 0393957357 ("Microeconomic analysis"). CC0 (metadata); book content not read. openlibrary.org
- Wikipedia, "Economic equilibrium" (CC BY-SA 4.0), which cites: Smith, Adam (1776), Wealth of Nations , Penn State Electronic Classics edition, republished 2005, Chapter 7: p.51-58 (original not read by us) en.wikipedia.org
- Wikipedia, "Economic equilibrium" (CC BY-SA 4.0), which cites: See citations at Great Famine (Ireland): Food exports to England, including Cecil Woodham-Smith The Great Hunger; Ireland 1845–1849, and Christine Kinealy, 'Iri (original not read by us) en.wikipedia.org
- Wikipedia, "Economic equilibrium" (CC BY-SA 4.0), which cites: Dixon, "The Foundations of Economic Thought", Blackwells, 1990, p. 356–394 (we also read that source) en.wikipedia.org
- Open Library record, ISBN 0631156429 ("Foundations of economic thought"). CC0 (metadata); book content not read. openlibrary.org
- Open Library record, ISBN 0262201232 ("Methods of Macroeconomic Dynamics"). CC0 (metadata); book content not read. openlibrary.org
Each numbered sentence above was checked against the source it cites before publication. Sentences citing Wikipedia adapt text from the English Wikipedia article Economic equilibrium (contributors), used under CC BY-SA 4.0; this entry is available under the same licence. Other sources were used for facts only; no text or images are copied from them.
More in Economic Concepts & Models
Sources
Compiled from Wikipedia and the sources listed below. Text from Wikipedia is available under CC BY-SA 4.0; this entry is adapted from it.
- Wikipedia: Economic equilibrium (CC BY-SA 4.0).
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