ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -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-2: -An equilibrium price, also known as a market-clearing price, is the consumer cost assigned to some product or service such that supply and demand are equal, or close to equal. The manufacturer or vendor can sell all the units they want to move and the customer can access all the units they want to buy.

Detailed explanation-3: -The market for coffee is in equilibrium. Unless the demand or supply curve shifts, there will be no tendency for price to change. The equilibrium price in any market is the price at which quantity demanded equals quantity supplied. The equilibrium price in the market for coffee is thus $6 per pound.

Detailed explanation-4: -When price prevailing in the market is higher than the equilibrium price, demand will be less than supply, i.e. there is excess supply in the market. Excess supply will force the market price to slide down causing expansion of demand and contraction of supply.