In microeconomics, equilibrium refers to a situation in which there is no tendency for change. That is, all relevant economic variables are constant. The term is used most often in reference to the price of a good or service, where it indicates that the price has reached a level at which quantity demanded and quantity supplied are equal.
In a more general sense, equilibrium can also refer to any situation in which all economic variables are constant. This could include employment levels, interest rates, or even the level of economic activity.
What is market equilibrium microeconomics? In microeconomics, market equilibrium is the state in which the market price of a good or service is stable, in other words, neither rising nor falling. This occurs when the quantity demanded by consumers equals the quantity supplied by producers.
There are two types of equilibrium in a market:
• Static equilibrium: This is when the market is in equilibrium at a specific point in time. The market price will be stable and there will be no tendency for it to change.
• Dynamic equilibrium: This is when the market is in equilibrium over time. The market price will fluctuate around a certain level, but there will be no overall tendency for it to rise or fall.