Equilibrium plays a crucial role in market stability from "summary" of Business Cycles and Equilibrium by Fischer Black
Equilibrium is a fundamental concept in economics. It represents a state where supply and demand are balanced, leading to stable prices and quantities exchanged in the market. In this state, there is no tendency for prices or quantities to change, as the forces of supply and demand are in harmony. Market stability is closely tied to equilibrium. When markets are in equilibrium, there is a sense of order and predictability. Prices are set at a level where buyers and sellers are satisfied, leading to efficient allocation of resources. This stability is crucial for the smooth functioning of the market economy. In contrast, when markets are in disequilibrium, there is a sense of imbalance and uncertainty. Prices may be too high or to...
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