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• Equilibrium


  A condition where market forces are balanced, a concept borrowed from physical sciences, where observable physical forces can balance each other
• Equilibrium price


  • The price where the buyers and the sellers are in agreement to buy and sell the same amount of commodity
  • A stable price since there is no pressure from the buyers and sellers to alter the amount they want to buy and sell
• Equilibrium point is where the demand curve and supply curve intersect, and consumers and sellers are in agreement on the price that the commodity will be bought and sold
• Disequilibrium


  • A state of the economy in which the quantity demanded of a product or service is not equal to its quantity supplied
  • It causes the price of a product to either rise above or fall below the equilibrium price
  • The purpose of studying disequilibrium is to analyze the variation in market price and equilibrium price
  • It refers to the disagreement of the buyers and sellers on the price and quantity
• Causes of disequilibrium


  • Fixed prices of goods and services
  • Government regulations
  • Deficit or surplus of the current account
  • Other reasons (political instability, inflation, deflation, foreign exchange reserves, population growth)
• Fixed prices of goods and services


  Disequilibrium occurs when a supplier sets a fixed price for a good or service for a certain time period, and the quantity demanded increases in the market leading to a shortage of supply
• Government regulations


  If the government sets a floor or ceiling for a good or service, the market may become inefficient if the quantity supplied is disproportionate to the quantity demanded (e.g. price ceiling on rent, minimum wage rate for laborers)
• Deficit or surplus of the current account


  A deficit or surplus is created in the current account when the imports of a nation do not match its exports
• Equilibrium and disequilibrium are two concepts that shape the balance of the economic world
• Other applications of demand and supply analysis

  • Price ceiling
  • Price floor
  • Applications in labor market
  • Minimum wage as price floor
  • Application in foreign exchange market
  • Labor migration and the OFW
  • Determination of rent
• Price ceiling


  It keeps a price from rising above a certain level or also known as "maximum price policy" (e.g. Suggested Retail Price)
• Excess supply


  If the quantity demand is less than the quantity supplied at the given price, also called SURPLUS
• Price floor


  It keeps a price from falling below a certain level or also known as "minimum price policy" (e.g. to support tobacco planters in achieving a reasonable income, the government may set a floor price of tobacco in the market)
• Excess demand


  If the quantity demand is greater than quantity supplied, there is excess demand at the prevailing price, also called SHORTAGE
• Labor market


  The supply of and demand for labor, for which employees provide the supply and employers provide the demand
• Minimum wage


  The amount that an employer can pay for their employees' labor, and if someone is working full time, they ought to be able to afford a basic standard of living
• Labor migration and the OFW


  • The labor migration of Filipinos can be analyzed in terms of demand for OFWs and supply of OFWs in the international labor market
  • As foreign wage increases, it becomes more attractive for the Filipinos to work abroad
  • As the foreign wage decreases, foreign firms will demand more OFWs
• Foreign exchange rate


  The price of foreign currency (e.g. the exchange rate for the Philippine pesos and US dollar is Php 55, meaning the price of one dollar is 55 pesos)
• Rent


  • The payment made regularly for a fixed period for the use of services or goods (e.g. house, shops, furniture)
  • Contract rent is the payment made for the use of land and the capital invested
  • Economic rent is the price paid for the use of the services of land, received by the landlord without economic effort