MARKET EQUILIBRIUM - It is a state in which the market supply or quantity supplied and market demand or quantity demanded is equal.
In a particular situation , when there might be too much supply of goods or services the cost(price) goes down ,due to which it increase higher demand. The balancing outcome of supply & demand results in a state of equilibrium.
In order to study how a market work these points are considered :-
1.equilibrium is when supply repay demand and vice versa
2.every goods produced in the market will be sold
3.They are equal , and there should be no tendency for the market to change.
example - a manufacturer produced different types of cars. His best seller was the convertible car. It cost around 2500000 to all retailers. unexpectly new improved technology used for faster shipping processes.It led competitors offer the same converitible cars.Then the manufacturer lowered his cost price to 2000000 to see how the consumer react to this situation. At the end it appeared that the solution have worked.He had no unsold cars and managed to get ridd of all convertible cars in his inventory. The supply was perfectly right to meet the demand at that cost (price) point.
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