When market equilibrium occurs, quantity demande is equal to quantity supplied....?

Question

which means that both sellers and buyers get what they want. Does a market reach market equilibrium on its own, or is it necessary to have some sort of regulator to manage the price and ensure there is equilibrium?

Answer 1

Very good question; I think the answer to that question gets to the very heart of progressive vs. conservative economic policy.

Standard Economic Theory states that, all things being equal, a market will ultimately find its own equalibrium.  On the supply side, producers will only make enough guns and butter to satisfy demand as the production of extra supply goes to waste and not meeting demand equates to lost income.  On the demand side, the price determined by the supplier dictates how much guns and butter is in demand.  The issues of too much supply, too little supply, too expensive and too cheap ultimately corral the price in each industry by action taken by either the supplier OR the consumer.  This is what Smith meant by the "Invisible Hand."

Economic progressives, however, would argue that this is an oversimplification of the system as monopolies, bad and/or false information, and collusion can impact prices in a way that unfairly favors the suppliers.  To this end, government action must sometimes take place to prevent abuses against consumers.

Answer 2

The definition of equilibrium is that demand and supply are in balance. Generally any regulatory effort results in equilibrium never being reached.

Take the case of gasoline, today. If regulation be applied, so that people may buy only so much per capita, and may trade with each other for quotas, we will impose an arbitrary limit on demand, to match supply. We may then see further reduction in supply because there is no stimulus to maintain or increase supply.

The attempt to limit demand does not ensure supply, nor does an attempt to limit price. An attempt to compel supply is unlikely to succeed for long, and of course with non-renewable resources, compelling supply now must mean an earlier end to supply.

Answer 3

a free market reaches equillibrium automatically by matching the sellers with the buyers according to the price and quantity that brings supply and demand equal.  

Actually neither buyer or seller get what they want.  they get what they will accept in favor of other alternatives for their time and money.  Buyers want everything for free and sellers want an infinate price for each item.  Its what they will accept over the alternatives that is the key.

Answer 4

In an ideal market, no.

At prices above the equilibrium price, supply exceeds demand.  Sellers will recognize the need to lower their price in order to sell more goods and make more revenue.  Consumers will buy more once the price has dropped.

At prices greater than equilibrium, demand will exceed supply.  Sellers will realize that their product is in great demand, and they can maximize their return by increasing the price to the equilibrium level.  As the price rises, consumer demand will drop off.

Unfortunately, we do not live in an ideal world, so ideal markets tend to be rare.  Regulators do not necessarily push the markeet to equilibrium either.  They can be used to keep demand up, supply low, and in a multitude of other fashions.

If you need more help, I can draw you some diagrams.  I like diagrams.