Economic equilibrium

Economic equilibrium is a state in which economic agents’ plans are mutually compatible, leaving no participant with an incentive to change behavior under prevailing conditions.

Supply and demand: A model of how prices and quantities respond to buyers’ demand and sellers’ supply. Their intersection identifies a market-clearing price and quantity.
Economic agent: An individual or organization modeled as making choices under constraints. Equilibrium combines the plans of agents such as households and firms.
Market failure: A situation in which decentralized markets do not produce an efficient allocation of resources. An equilibrium can persist even when externalities or other failures make its outcome inefficient.
Partial equilibrium: An analysis of equilibrium in one market while treating conditions in other markets as fixed. It isolates one market’s response without modeling every linked market.
Market-clearing price: A price at which the quantity buyers want equals the quantity sellers offer. At this price, planned purchases and sales in a market are compatible.
Optimization problem: A problem of choosing the best feasible option according to an objective function. Agents’ optimized choices supply the plans that equilibrium must reconcile.
Pareto efficiency: An allocation is Pareto efficient if no feasible change can help someone without harming someone else. Equilibrium describes compatible plans; Pareto efficiency evaluates the resulting allocation.
General equilibrium theory: The study of prices and allocations across interconnected markets considered together. It extends compatibility from individual markets to the economy-wide system.
Walrasian equilibrium: A competitive-market allocation in which every market clears at prices agents take as given. It formalizes economy-wide compatibility across markets, not just one market.
Budget constraint: A limit on affordable choices determined by income, prices, and available resources. It restricts household plans before their compatibility with other plans is assessed.

Linked from 6 pages