Answer to Question #98158 in Microeconomics for annie

Question

Assume there is an excess supply in the market for teachers. How would the market return to the
equilibrium?

Answer 1

Market equilibrium is a market state where the supply in the market is equal to the demand in the market. The equilibrium price is the price of a good or service when the supply of it is equal to the demand for it in the market. If a market is at equilibrium, the price will not change unless an external factor changes the supply or demand, which results in a disruption of the equilibrium. If a market is not at equilibrium, market forces tend to move it to equilibrium.

Excess supply in the market for teachers

If the market price is above the equilibrium value, there is an excess supply in the market (a surplus), which means there is more supply than demand.

  If the market price is above the equilibrium value, there is an excess supply in the market (a surplus), which means there is more supply than demand. In this situation, teachers will tend to reduce the price of their service. They probably will also slow down their service or stop new teachers to enter the market. The lower price entices more people to get services, which will reduce the supply further. This process will result in demand increasing and supply decreasing until the market price equals the equilibrium price.