Market inefficiencies can lead to disequilibrium from "summary" of Business Cycles and Equilibrium by Fischer Black
Market inefficiencies can arise when prices do not accurately reflect all available information. Such inefficiencies can lead to disequilibrium in the market, where demand and supply are not in balance. This can result in shortages or surpluses of goods or services, which can in turn impact prices and further exacerbate the imbalance. Disequilibrium can also be caused by factors such as government intervention, external shocks, or irrational behavior by market participants. When these factors disrupt the normal functioning of the market, prices may not accurately reflect the true value of goods or services. This can create distortions in the market and lead to inefficiencies that prevent the market from reaching equilibrium. In a perfectly efficient market, prices would always accurately reflect all available information and supply would equal demand. However, in reality, markets are not always efficient and can be subject to various forms of inefficiency. These inefficiencies can arise from factors such as information asymmetry, transaction costs, or externalities, which can prevent prices from adjusting to their equilibrium levels. When market inefficiencies persist, they can create a vicious cycle of disequilibrium that can be difficult to break. For example, if prices are artificially inflated due to a lack of competition or government intervention, this can lead to a surplus of goods or services and ultimately result in a market correction. Similarly, if prices are artificially depressed due to information asymmetry or irrational behavior, this can lead to shortages and further distortions in the market.- Market inefficiencies can lead to disequilibrium by preventing prices from accurately reflecting the true value of goods or services. This can create imbalances in supply and demand that can persist over time and disrupt the normal functioning of the market. As a result, it is important for market participants to be aware of these inefficiencies and take steps to mitigate their impact on the market.
