Updated: Aug 20, 2021

The state of a system in which equilibrium has not been attained. Opposing forces which act on the system are not in balance, so there is a tendency for at !east some of its endogenous variables to change over time. In economics disequilibrium is usually associated with the mutual inconsistency of the plans of economic decision-takers, so that some at !east of these plans are not realized and all of them are eventually revised. For example, a market will be in disequilibrium if the total quantity whicq buyers plan to buy at the going price exceeds the quantity which seilers plan to seil. In the event some buyers will not be able to realize their plans, price will be bid up, and all seilers and buyers will revise their plans accordingly. A question of great interest for all economic systems is whether the characteristics of the system are such that this process of plan revision will lead towards or away from an equilibrium, and this is the subject matter of stability analysis. Where the disequilibrium adjustment process leads towards an equilibrium, the system is called stable, while the term unstable is applied to the converse case.

Reference: The Penguin Dictionary of Economics, 3rd edt.

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James Knight
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James is the Editor of Education for Invezz, where he covers topics from across the financial world, from the stock market, to cryptocurrency, to macroeconomic markets.... read more.