What should everyone know about economic equilibrium?

Question:

What should everyone know about economic equilibrium?

Market Equilibrium:

In a competitive market, equilibrium is achieved where supply and demand are equal. At this point, there is a price such that the quantity supplied equals the quantity demanded.

Answer and Explanation:

The one fact that everyone should know about equilibrium is that when supply and/or demand changes, the market will adjust to the new equilibrium price and output level. This process explains why the prices of different goods and services increase or decrease. For example, during the most recent recession, income levels declined. This cause the demand for homes to decrease, which cause the equilibrium price to also decline.


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