Market Disequilibrium

Definition

Market disequilibrium refers to a situation where the quantity demanded does not equal the quantity supplied at a given price. It creates imbalances in the market and leads to either surpluses or shortages.

Analogy

Think of market disequilibrium as a traffic jam. When there is too much demand (traffic) and not enough supply (road capacity), congestion occurs, causing delays and imbalances in the flow of goods and services.

Related terms

Excess Demand: Excess demand occurs when the quantity demanded exceeds the quantity supplied at a given price, resulting in a shortage.

Excess Supply: Excess supply happens when the quantity supplied exceeds the quantity demanded at a given price, leading to a surplus.

Price Controls: Price controls are government-imposed regulations that set maximum or minimum prices for goods or services. They can disrupt market equilibrium by preventing prices from adjusting freely.