2.4.1—Market equilibrium

Equilibrium occurs at the price and quantity where buyers’ quantity demanded equals sellers’ quantity supplied. A disequilibrium creates excess demand or excess supply.

If price is above equilibrium, a surplus puts downward pressure on price; if below, a shortage puts upward pressure, assuming prices can adjust.

At £5, buyers want 100 units and firms offer 100: equilibrium. At £3, demand may exceed supply, creating a shortage and pressure for price to rise.

Equilibrium does not mean the quantity is morally ideal or that nothing changes; it means the market-clearing condition at that moment.