Equilibrium Quantity
Candlefocus EditorWhen looking at the equilibrium quantity of any market, it's important to consider both the supply and the demand for the product being studied. Demand is the quantity of a product that consumers are willing and able to buy at a given price. Supply is the quantity of a product that producers are willing and able to supply at a given price. When the supply and demand curves intersect, the price and the number of units supplied and demanded at this point is the equilibrium point.
The idea behind equilibrium quantity is that it's the optimal amount of a product that should be supplied and consumed. Economists agree that businesses and consumers are rational in their decision-making and that when given the choice, they will inevitably opt for the best possible price and quantity combination to satisfy their needs. As such, when the market reaches its equilibrium quantity, businesses and consumers are both getting the best possible deal they can. However, due to market dynamics, markets rarely remain at equilibrium quantum for extended periods of time.
To maintain market equilibrium, buyers and sellers must keep the price of the product constant. If the price of a product is too low, then quantity demanded will be higher than quantity supplied, resulting in a shortage. Similarly, if the price is too high, then quantity supplied will be higher than quantity demanded, which will result in a surplus. In either case, if this imbalance is allowed to persist, then the market will rapidly deviate from equilibrium as businesses and consumers adjust to the change.
Equilibrium quantity helps businesses decide how much of a product to produce and helps consumers understand how much of a product can be expected to be available, setting realistic expectations for both producers and consumers. To maintain equilibrium, businesses and consumers must take active measures to adjust prices as needed and respond to changing markets as required. This allows free markets to remain functioning efficiently and optimally, rewarding businesses and consumers with reachable goals and equitable outcomes.