Disequilibrium

Oh no...disequilibrium. The tummy ache of markets. When markets are working smoothly (which happens when supply equals demand) the market is in a state of equilibrium. If markets had their own Facebook statuses, competitive markets working great for both consumers and suppliers would be “equilibrium.” When a market’s status is set to “disequilibrium,” it means market supply isn’t equal to market demand.

When a market is facing disequilibrium, there’s either a surplus or a shortage in the market. A surplus would mean suppliers have more stuff than they can sell. Consumers aren’t buying it all up because the price is too high. Too much supply and not enough demand to meet it...not at that price.

With a shortage, it’s the opposite: there’s too much demand and not enough supply. Prices are low, and people want more than there is available to buy.

Disequilibrium isn’t ideal, but is unfortunately common in real-life markets. A good or service might be adjusting to equilibrium, swinging into surplus and shortage disequilibrium like a pendulum in a competitive market. Other times, disequilibrium is part of life, especially in oligopoly and monopoly situations where suppliers are price-makers instead of price-takers.