Equilibrium quantity is when there is no shortage or surplus of an item. For example, in the neoclassical growth model, starting from one dynamic equilibrium based in part on one particular saving rate, a permanent increase in the saving rate leads to a new dynamic equilibrium in which there are permanently higher capital per worker and productivity per worker, but an unchanged growth rate of output; so it is said that in this model the comparative dynamic effect of the saving rate on capital per worker is positive but the comparative dynamic effect of the saving rate on the output growth rate is zero. [2] These are: Equilibrium property P1: The behavior of agents is consistent. Because a market economy rewards those who guess better, through the mechanism of profits, entrepreneurs are in effect rewarded for moving the economy toward equilibrium. We will also see similar behaviour in price when there is a change in the supply schedule, occurring through technological changes, or through changes in business costs. Economic equilibrium is a condition where market forces are balanced, a concept borrowed from physical sciences, where observable physical forces can balance each other. Supply matches demand, prices stabilize and, in theory, everyone is happy. Economic equilibrium is a theoretical construct only. Economic equilibrium is a condition or state in which economic forces are balanced. Definition: Equilibrium refers to the economic situation where supply and demand for a certain good or service in the market is equal, which represents a stable market price to purchase and sell. The process of comparing two dynamic equilibria to each other is known as comparative dynamics. The Nash equilibrium occurs when both firms are producing the outputs which maximize their own profit given the output of the other firm. Like the air pressures in and around the balloon, supply and demand will not be in balance. Economic equilibrium is also referred to as market equilibrium. However, if an equilibrium is unstable, it raises the question of reaching it. [1] 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 amount of goods or services produced by sellers. A system is set to be in equilibrium in which it is at rest or when it is moving at a constant rate in a steady direction. In effect, economic variables remain unchanged from their equilibrium values in the absence of external influences. If this refers to a market for a single good, service, or factor of production it can also be referred to as partial equilibrium, as opposed to general equilibrium, which refers to a state where all final good, service, and factor markets are in equilibrium themselves and with each other simultaneously. In economics we can think about something similar with regard to market prices, supply, and demand. [3] Both firms produce a homogenous product: given the total amount supplied by the two firms, the (single) industry price is determined using the demand curve. On the other hand, a decrease in technology or increase in business costs will decrease the quantity supplied at each price, thus increasing equilibrium price. That is, any excess supply (market surplus or glut) would lead to price cuts, which decrease the quantity supplied (by reducing the incentive to produce and sell the product) and increase the quantity demanded (by offering consumers bargains), automatically abolishing the glut. We can talk about economic equilibrium at product, industry, market, or national level, i.e., the whole economy level. 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. It is usually set by law and limits how high the rent can go in an area. To see whether Property P3 is satisfied, consider what happens when the price is above the equilibrium.