The equilibrium price and quantity occur at the point where supply equals demand, commonly illustrated through the intersection of supply and demand curves on a graph. This equilibrium reflects a balance between what producers are willing to supply and what consumers are willing to purchase, resulting in market stability without shortages or surpluses. Several factors influence supply and demand, shaping market dynamics and affecting the equilibrium point. Changes in consumer preferences, income levels, population demographics, and technological advancements can all alter demand patterns. For example, a rise in income may lead to increased demand for luxury goods, while advancements in technology may reduce the demand for certain outdated products [2,3].
On the supply side, factors such as production costs, technological innovations, resource availability, and government regulations play significant roles. Higher production costs, including labor and raw materials, can decrease supply, while technological advancements may enhance productivity and expand production capabilities. Government policies, such as taxation, subsidies, and trade regulations, can also influence supply by altering production costs or market access for producers. Economic equilibrium is not static but rather a dynamic process that constantly adjusts to changing conditions. External shocks, such as natural disasters, geopolitical events, or technological breakthroughs, can disrupt the balance between supply and demand, leading to temporary imbalances in markets. In response to such disruptions, markets undergo adjustments to restore equilibrium. For instance, if a sudden increase in demand outstrips existing supply, prices may rise, signaling producers to increase production to meet the higher demand. Conversely, if supply exceeds demand, prices may fall, prompting producers to reduce output or find alternative markets. Price flexibility plays a crucial role in facilitating market adjustments. In competitive markets, prices serve as signals that guide resource allocation and production decisions. When prices deviate from equilibrium, market forces act to restore balance through changes in production and consumption behavior [4].