Supply and demand are key determinants of market equilibrium from "summary" of Business Cycles and Equilibrium by Fischer Black
Supply and demand are essential factors in determining market equilibrium. The interaction between these two forces ultimately dictates the price at which goods and services are exchanged in the market. When there is an imbalance between the quantity supplied and the quantity demanded, market forces come into play to restore equilibrium. If the supply of a good or service exceeds the demand for it, prices will inevitably fall. This decrease in price incentivizes consumers to purchase more of the product, thereby increasing demand. On the other hand, when demand outstrips supply, prices rise, leading to a decrease in demand as consumers become less willing or able to purchase the product at the higher price point. Market equilibrium is achiev...Similar Posts
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