Definition of market disequilibrium

The Allocation of Resources – Price Determination

Definition of Market Disequilibrium

Market disequilibrium happens when the quantity that buyers want to buy (quantity demanded) is not the same as the quantity that sellers are ready to sell (quantity supplied) at the current price.

Think of a popular video‑game launch:

• 🎮 Demand – many gamers want the game.
• 📦 Supply – only a limited number of copies are produced.
• ⚖️ If the price is too low, the demand exceeds supply → a shortage.
• 💰 If the price is too high, the supply exceeds demand → a surplus.

When a shortage or surplus exists, the market is not in equilibrium. The price will usually change until the quantity demanded equals the quantity supplied, restoring equilibrium.

Shortage vs. Surplus

1. Shortage – Quantity demanded > Quantity supplied

   • Example: A new smartphone model that sells out within hours.
   • Consequence: Prices tend to rise, or a waiting list forms.

2. Surplus – Quantity supplied > Quantity demanded

   • Example: A factory produces 1,000 units of a gadget, but only 600 are sold.
   • Consequence: Prices tend to fall, or excess stock is stored.

Illustrative Table

Key Take‑away

Market disequilibrium is a temporary state that signals the market to adjust prices.

When the price moves in the right direction, the quantity demanded and supplied will match, and the market reaches equilibrium again.