Question

What is the equilibrium point? How is it achieved? Why are prices above or below the equilibrium point unjust? from the point of the consumer

Answer 1

A point which is the optimum position which generates equal amount of demand and supply in a market position is the equilibrium point. At this point the price of the goods and services will be at point where the quantity demanded will be equal to the quantity supplied. This point will bring a equilibrium situation in the market and the economy. At this point the demand as well as the supply curves intersect.

First of all it has to be found out at what price the demand and supply curves intersect , this will give the equilibrium price and eventually the equilibrium point. A constant watch on the quantity demanded and the quantity supplied has to be carried out to determine the same.

When the prices of the goods are above the equilibrium point that means there is a surplus because quantity of the goods supplied will exceed the quantity demanded. There will be surplus so again the price will go down creating an imbalance. And on the other hand, if the prices of the goods are below this equilibrium point that means quantity demanded is more than the quantity supplied. This will create a situation of shortage in the market, which will increase the prices of the goods again making it difficult for the economy as a whole. Therefore, both the situations are unjust and not reliable.