Intertemporal Equilibrium

And finance Allah shmoop what is market equilibrium All right

people when we're talking market equilibrium we're talking about the

market for a specific good or service pick a thing

Anything Market equilibrium happens when the quantity demanded of a

thing equals the quantity supplied of a thing at a

given price Well at market equilibrium there's no excess supply

which would mean you know cranky suppliers and no excess

demand which would mean cranky consumers at equilibrium Everybody's chill

at a price Well the reason economist gush over market

equilibrium like a diehard believer at a J Beat's concert

is because well it's kind of a magical force of

its own Like the mother nature of capitalism When the

market is competitive market equilibrium happens naturally If you ever

heard of Adam Smith's invisible hand well this is what

he was talking about In a perfectly competitive market where

there are lots of equally size sellers selling no Amazons

or Walmart stopping all over the little guy's the invisible

hand is what keeps surpluses and shortages from happening For

example the fake mustache market Yes there's a market for

that where the mustache supply curve crosses with the mustache

demand curve And that's where mustache equilibrium is that drop

a plumb line down from equilibrium to see the equilibrium

Quantity of moustache is likewise You can see the equilibrium

price where the supply and demand curves cross on the

left hand side of graft In our perfectly competitive mustache

market the amount of moustache is sold in the price

they're soul That is capitalism's invisible hand at work When

suppliers try to sell their fake mustache is at too

high a price Consumers will Balkh They'll think it's a

rip off and go buy somewhere else instead Leaving cellars

with a surplus of fake mustache is Remember the mustache

market has many mustache suppliers all competing against one another

well because consumers will flock to the mustache supplier with

the best value like best prices in this case since

it's all the same moustache Will this keep suppliers from

holding the fake mustache market hostage Many mustache The buyers

competing for the dollars of mustache buyers will naturally drive

prices down if they're too high Well the invisible hand

smacks mustache suppliers upside the head making suppliers realized they

should drop their price if they want to sell some

moustache is but they don't want to make the price

too low because well if suppliers dropped the price of

a fake moustache is too low Well there will be

a mustache shortage in a while We can't have that

right The moustache will be super cheap Everyone rushed to

buy one and there won't be an in store and

people be cranky Yes when there's a shortage of moustache

is there's an ugliness Not even the best fake mustache

could cover up Consumers will be at each other's throats

Fighting over fake moustache is like it's Black Friday or

something like that When they're all sold out consumers will

be demanding Mauritz just too good of a deal So

in the case of a moustache shortage the invisible hand

will be smacking mustache suppliers upside the head again making

the supplier realized they could be making more money if

they sold more Mustache is and at a higher price

Well after competitive suppliers get some wise guidance from the

smack smack invisible hand We get market equilibrium Just like

Goldilocks The invisible hand says Uh not too much not 00:03:08.503 --> [endTime] too little but just right Yeah