Equilibrium is a situation in which economic forces such as supply and demand are balanced and in the absence of external influences, the values of economic variables will not change. Ex: in the standard text perfect competition, occurs at the point at which quantity demanded and quantity supplied are equal. Market equilibrium in this case is a condition where a market price is established through competition such that the amount of goods or services sought by buyers is equal to the number of goods or services produced by sellers.
This price is often called the competitive price or market clearing price and will tend not to change unless demand or supply changes and quantity is called the “competitive quantity” or market clearing quantity. But this concept in economics also applies to imperfectly competitive markets, where it takes the form of a Nash equilibrium.
Chemical equilibrium is the state in which both the reactants and products are present in concentrations that have no further tendency to change with time so that there is no observable change in the properties of the system. This state results when the forward reaction proceeds at the same rate as the reverse reaction. The reaction rates of the forward and backward reactions are generally not zero, but they are equal. Thus, there are no net changes in the concentrations of the reactants and products. Such a state is known as dynamic equilibrium.
Properties of Equilibrium
- Equilibrium property P1: The behavior of agents is consistent.
- Property P2: No agent has an incentive to change its behavior.
- Property P3: It is the outcome of some dynamic process.
It does not necessarily mean that reactants and products are present in equal amounts. It means that the reaction has reached a point where the concentrations of the reactant and product are unchanging with time because the forward and backward reactions have the same rate.