ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Economists find that prices tend to fluctuate around the equilibrium levels. If the price rises too high, market forces will incentivize sellers to come in and produce more. If the price is too low, additional buyers will bid up the price.

Detailed explanation-2: -Buyers can buy the quantity they want to buy at the market price, and sellers can sell the quantity they want to sell at the market price. So, is equilibrium a constant, unchanging point? No. Markets do have a natural tendency to settle at the equilibrium price, but the price may bounce around a bit in the process.

Detailed explanation-3: -The market is always moving towards equilibrium because if the price is too high, there is a surplus and prices tend to fall until the surplus is sold and equilibrium is reached, and if the price is too low, there is a shortage and producers raise prices and increase quantity supplied.

Detailed explanation-4: -An equilibrium price is a balance of demand and supply factors. There is a tendency for prices to return to this equilibrium unless some characteristics of demand or supply change. Changes in the equilibrium price occur when either demand or supply, or both, shift or move.

Detailed explanation-5: -Markets tend to equilibrium, because prices adjust when for a given price the quantity supplied and the quantity demanded are not compatible.