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market equilibrium


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The situation when supply and demand in a market are equal at the prevailing price. Market equilibrium refers to a single market, whereas general equilibrium refers to all markets being in equilibrium simultaneously. When a single market is considered equilibrium occurs at the price and quantity determined by the intersection of the supply and demand curves or, if supply always exceeds demand, at a price of zero with quantity determined by demand. Market equilibrium in the short run can be compatible with firms earning in excess of (or less than) normal profit. In the long run entry and exit will occur until the marginal firm earns only normal profit, unless there are barriers to entry.

Market Equilibrium

Subjects: Environmental Science — Economics.


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