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True or False and why? All markets eventually come to equilibrium. Will they come to equilibrium...

True or False and why? All markets eventually come to equilibrium. Will they come to equilibrium at the same time for all markets - like for bread, cars, baseball games, and vegetables?

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Answer #1

It is true that eventually market return to equilibrium position but this takes a long period in some markets where market frictions are extreme and prevent the market to reach the equilibrium level. However this is true only for the goods for which the market exists. The transition from short run to long run can be painful though.

This is however not correct to conclude that equilibrium will be persisting for all the markets simultaneously. Different markets have different frictions and not all the markets will take the same time to return to the equilibrium position. Some markets will take time to adjust such as the market for cars while some markets will adjust quickly like that of a bread. Therefore simultaneous equilibrium in all the markets is not possible to achieve.

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