Economic equilibrium

In economics, economic equilibrium is a state where economic forces such as supply and demand are balanced and in the absence of external influences the (equilibrium) values of economic variables will not change.

Quotes

• There are many anticipators of marginal analysis. Three major names were Augustin Cournot (1801-1877), J. H. von Thünen (1783-1850), and H. H. Gossen (1810-1858).
  Cournot's originality and ingenuity can hardly be exaggerated. 200 small pages, he described and defined the downward-sloping demand curve, completely analyzed the maximization of profit under conditions of monopoly, advanced an ingenious explanation of duopoly pricing, proved that equilibrium price occurred when aggregate supply equaled aggregate demand, and exactly defined the market from which we call perfect competition and he called "unlimited competition." And the book went unread.
  • Robert Lekachman, A History of Economic Ideas (1959) Part III. Marginalists and Opponents: 10. The New Economics.

• There's a lot of misplaced criticism of equilibrium models. For explaining 1950-, 1960-, 1970-type business cycles, they're a lot more robust than some people give them credit for. The failure of wages and prices to adjust is no problem because there's a lot of reasons, many of them coming from contract theory and models of enduring relationships, that would lead one not to expect the current real wage/price to adjust to clear the current labor market. [...] What we mean by equilibrium is essentially two things. First, we set out to explain data on prices and quantities as resulting from the interaction of individual decisions; that's the key thing together with the notion that markets clear in some sense. That doesn't mean everybody has a job every period. The notion of clearing may be much more complicated and may involve lotteries. There are various responses why workers are unemployed. [...] Another thing is that these environments are sufficiently complicated so that it's not automatic that equilibria are optimal.
  • Thomas J. Sargent, in Conversations with Economists (1983) by Arjo Klamer