In an abstract representation of a competitive market mechanism such as the Panel (a) of Figure D1-1 in Chapter D1, economists assert that when price is too high for quilibrium, market forces will cause it to fall until quantity demanded is just equal to quantity supplied and inventories are no longer accumulating.  Or, when price is too low for equilibrium, market forces will cause price to rise until quantity demanded is just equal to quantity supplied, and inventories are no longer depleting.  The resulting equilibrium is then a “state of rest” with no further change until the mechanism is disturbed by a change in one or more of the determinants of demand or supply which have been assumed constant.

What are the market forces which actually cause market price to fall or to rise.  Demand must be understood to be a schedule of the collective intentions of all of those who hope to acquire quantities of the good from the market at different possible prices.  Likewise, supply is a schedule of the collective intentions of those who wish to offer quantities of the good on the market at different possible prices.  At any price other than the equilibrium price, the intentions of only one set of market participants (either demanders or suppliers) can be met.  The intentions of the other set of market participants are not met.  Only in equilibrium can the intentions of both sets of market participants be met.  It is in this sense that it is sometimes said that equilibrium describes a sort of “bliss state” in a market.

When price is too high for equilibrium, only the intentions of demanders can be fully met because they can purchase all of the good that they want to purchase at the too-high price.  The intentions of suppliers, wishing to offer a larger quantity of the good on the market than demanders wish to purchase, are at least partially frustrated.  Either all suppliers will sell some of what they offered, or some suppliers will sell as much as they want to sell while others sell little or none.  In any case, it is the quantity demanded which will actually be transacted on the market.  Suppliers collectively are pushed or forced off of their schedule of intentions.  It is thus suppliers who are unhappy at the outcome, and it is suppliers who can be expected to become the activists in the market to do something about their discomfort.  The immediate response to the problem of increasing inventories is to cut price. Another way of saying this is that it is the suppliers who feel an itch (increasing inventories) which they feel compelled to scratch (by cutting price).

When price is too low for equilibrium, only the intentions of suppliers can be fully met because they can sell all of the good that they want to sell at the too-low price.  In this case, it is the intentions of demanders, wishing to acquire a larger quantity of the good from the market, which are at least partially frustrated.  Some demanders (perhaps the first to arrive at the market) may be able to purchase all of the good that they want at the too-low price, but others (the later arrivals) will have to leave the market empty-handed or with less than they would like to have purchased.  The quantity supplied is the quantity which is transacted on the market.  It is demanders whose intentions cannot be fully met, and who will sense an itch (to acquire more of the good at the too-low price) which requires a scratch (to offer a higher price in hopes of capturing a larger quantity of the good).

Demanders may or may not be able to scratch their itch when the price is too low for equilibrium.  In bazaar trading situations where there is interactive bidding and offering (dickering, haggling, higgling) between buyers and sellers, demanders can scratch their itches to acquire more of the good by bidding the market price upward, and price will continue to be bid upward by demanders until their intentions can be met.  Bazaar trading is a common mode of commerce in many of the so-called “third-world” countries.  Examples of this possibility in the “first” world include auctions, flea markets, yard sales, and new and used real estate and automobile markets.

Peoples in Western nations are perhaps more accustomed  to purchasing their needs in fixed-price retail shops where the prices of items are specified on stickers on the items themselves or on labels on the racks or shelves holding the items.  There is no opportunity to dicker over the price in such a shop (unless some flaw or damage can be identified).  The customer's only options are to purchase an item at the specified price or leave it in order to search for a better price at another shop.  In fixed-price retail shops, it is up to the seller to lower price when price is too high for equilibrium, and to perceive the opportunity to raise the price when it is too low for equilibrium.

The forces of market adjustment are the unmet intentions of market participants.  These forces of adjustment are inherent in the market mechanism, although they may lay dormant as long as a market is in equilibrium.  The forces are called into action when the intentions of one set or the other of the market participants cannot be met at the going price.  But once price has adjusted to a new level at which all intentions of market participants can be met, the forces of adjustment go dormant again.

This functioning of the market mechanism gives rise to a description of a market as an  “automatic, self-correcting mechanism,” much in the same sense that a thermostat-controlled heating and air conditioning (HVAC) system works automatically.  When the ambient temperature departs from the set criterion temperature, the thermostat calls the heating or cooling mechanism into operation.  The unmet intentions of market participants function as the adjustment triggering mechanism in a market.

Both markets and HVAC systems may also be described as “adjustment self-limiting mechanisms" in the sense that adjustment continues util the respective criterion is met, but then adjustment ceases.  The HVAC system continues to heat or cool until the ambient temperature reaches the criterion temperature, and then the thermostat shuts down the HVAC system and it remains in an idle state until something again disturbs the ambient temperature to cause it to diverge from the criterion temperature.  Likewise, price adjustment continues to occur in a market until the intentions of demanders and suppliers can be met by matching the quantity demanded with the quantity supplied in the market.  Then, price adjustment ceases and price remains at the equilibrium level util changes occur in the determinants of demand or supply.

In a dynamic world, equilibrium may not ever be an observable state because the determinants of demand and supply are ever changing.  This does not mean that equilibrium is an irrelevant mental construct which exists only in the minds of economists.  It is a real phenomenon which functions as an ever-moving target toward which the market mechanism continually attempts to adjust.  Its usefulness to the economic analyst is in attempt to predict the direction in which price (or quantity) will move toward a new equilibrium once changes in demand or supply are identified.