Topics

Market disequilibrium

This is when a market does not clear / when there is excess demand or excess supply

In market the forces of demand and supply exist / a market is somewhere for buyers and seller to come together for the purpose of exchange. Disequilibrium refers to an imbalance between the quantity demanded and the quantity supplied, at a particular price. If the product is underpriced, it will cause a shortage (excess demand) and this will push up price, encouraging further supply until equilibrium is reached). If the product is overpriced, it will cause an excess of supply, so the price will fall and this will incentivise demand to rise until equilibrium is reached.

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