Disequilibrium

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.

BREAKING DOWN '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; it is helpful for creating working models, but lacks real-world validation.

RELATED TERMS
  1. Equilibrium

    The state in which market supply and demand balance each other ...
  2. Economic Equilibrium

    A condition or state in which economic forces are balanced. These ...
  3. General Equilibrium Theory

    General equilibrium theory studies supply and demand fundamentals ...
  4. Competitive Equilibriums

    An equilibrium condition where the interaction of profit-maximizing ...
  5. John Maynard Keynes

    An author and economist who is well-known for his stance that ...
  6. Equilibrium Quantity

    The quantity of an item that will be demanded at the point of ...
Related Articles
  1. Markets

    Economist Guide: 5 Lessons John Maynard Keynes Teaches Us

    Read about the paradoxical and confusing world of John Maynard Keynes, including the lessons modern economists can still learn from the British thinker.
  2. Markets

    What Is Equilibrium?

    Equilibrium is a state of balanced supply and demand.
  3. Markets

    What Is Economic Equilibrium?

    Economic equilibrium occurs when market supply is equal to market demand.
  4. Markets

    Can Keynesian Economics Reduce Boom-Bust Cycles?

    Learn about a British economist's proposed solution to a common economic problem.
  5. Markets

    What is Market Failure?

    Market failure happens when economic conditions cause a market to be unable to reach supply/demand market equilibrium.
  6. Markets

    The Nash Equilibrium

    Nash Equilibrium is a key concept of game theory, which helps explain how people and groups approach complex decisions. Named after renowned mathematician John Nash, the idea of Nash Equilibrium ...
  7. Trading

    What's a Sensitivity Analysis?

    Sensitivity analysis is used in financial modeling to determine how one variable (the target variable) may be affected by changes in another variable (the input variable).
  8. Markets

    Why Can't Economists Agree?

    There are many reasons why economists can be given the same data and come up with entirely different conclusions.
  9. Investing

    Explaining the Liquidity Preference Theory

    According to the liquidity preference theory, investors demand interest in return for sacrificing their liquidity.
  10. Markets

    What is Deadweight Loss?

    Deadweight loss can be applied to any deficiency caused by an inefficient allocation of resources.
RELATED FAQS
  1. Why is Keynesian economics sometimes called depression economics?

    Learn how in observing the effects of the Great Depression, Keynes identified flaws in classical economic theory particularly ... Read Answer >>
  2. Why is PPP (purchasing power parity) controversial?

    Find out why economists disagree about the conceptual validity of the theory of purchasing power parity (PPP) to describe ... Read Answer >>
  3. How did John Maynard Keynes influence business cycle theory?

    Read about the impact of John Maynard Keynes on business cycle theory and the development of macroeconomics to study aggregate ... Read Answer >>
  4. How do I decide whether a credit card offer is a good deal or not?

    Discover the ways that externalities lead to market failure. Externalities are costs or benefits that go to a third party, ... Read Answer >>
  5. What is general equilibrium theory in macroeconomics?

    Achieving equilibrium of prices in a single or multi-market setting involves a bidding process that is informed precisely ... Read Answer >>
  6. What do Keynes and Freidman have to do with fiscal and monetary policy?

    Find out how John Maynard Keynes and Milton Friedman influenced how modern economists and analysts think about fiscal and ... Read Answer >>
Hot Definitions
  1. Frexit

    Frexit – short for "French exit" – is a French spinoff of the term Brexit, which emerged when the United Kingdom voted to ...
  2. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  3. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  4. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  5. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  6. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
Trading Center