what is disequilibrium 
disequilibrium is a situation where internal and or external forces prevent market equilibrium from being reached or cause the market to fall out of balance this can be a short term byproduct of a change in variable factors or a result of long term structural imbalances disequilibrium is also used to describe a deficit or surplus in a country s balance of payments understanding disequilibriumsometimes certain forces bring about a movement in the price of a commodity or service when this happens the proportion of goods supplied to the proportion demanded becomes imbalanced and the market for the product is said to be in a state of disequilibrium this theory was originally put forth by economist john maynard keynes many modern economists have likened using the term general disequilibrium to describe the state of the markets as we most often find them keynes noted that markets will most often be in some form of disequilibrium there are so many variable factors that affect financial markets today that true equilibrium is more of an idea a market in equilibrium is said to be operating efficiently as its quantity supplied equals its quantity demanded at an equilibrium price or a market clearing price in an equilibrium market there are neither surpluses nor shortages for a good or service equilibrium is thus the state in which market supply and demand balance each other and as a result prices become stable generally an over supply of goods or services causes prices to go down which results in higher demand while an under supply or shortage causes prices to go up resulting in less demand the balancing effect of supply and demand results in a state of equilibrium disequilibrium occurs when this adjustment of supply demand and or prices does not work as theorized market forces tend to restore disequilibrium states back to their equilibrium this is because people stand to profit from buying underpriced assets and selling overpriced ones leading arbitrageurs to push supply and demand back into balance disequilibrium in actionbelow is a hypothetical graph depicting supply and demand in the market for wheat as the graph shows the price at pe is the single price that incentivizes both farmers or suppliers and consumers to engage in an exchange at pe there is a balance in the supply and demand for wheat following our graph for the wheat market if prices increased to p2 suppliers will be willing to provide more wheat from their storage barns to sell in the market since the higher price would cover their production costs and lead to higher profits however consumers may reduce the quantity of wheat that they purchase given the higher price in the market when this imbalance occurs the quantity supplied will be greater than the quantity demanded and a surplus will exist causing a disequilibrium market the surplus in the graph is represented by the difference between q2 and q1 where q2 is the quantity supplied and q1 is the quantity demanded given the excess commodity supplied suppliers will want to quickly sell the wheat before it gets rancid and will proceed to reduce the sales price economic theory suggests that in a free market the market price for wheat will eventually fall to pe if the market is left to function without any interference 