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All price output combination outside the equilibrium combination are what?

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user1359694 | eNotes Newbie

Posted May 11, 2013 at 10:24 AM via web

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All price output combination outside the equilibrium combination are what?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted May 11, 2013 at 1:27 PM (Answer #1)

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The best way to answer this question is to say that all of the price and output combinations other than the equilibrium price and output combination are inefficient.

In economics, the allocation of resources is efficient if buyers get all they want of a good or service at a certain price and producers sell all of the goods and services that they want to sell at that same price.  In such a situation, there is no one left wanting to buy more (at that price) and no one left with unsold goods.

Whenever the price and output are not at equilibrium, there is either a shortage or a surplus.  Someone, whether it be the producers or the consumers, has not gotten to sell or buy the amount they would like.  This is not efficient.  Therefore, we can say that any combination of price and output outside of equilibrium is inefficient.

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