Question

What is market equilibrium?

Hint:

Market equilibrium occurs when the quantity demanded equals the quantity supplied, and the market price stabilizes.

Answer 1

Step 1: Defining Market Equilibrium:
Market equilibrium is a condition where the quantity demanded of a good or service equals the quantity supplied at the prevailing market price. In other words, at equilibrium, there is no tendency for the price to change, as both buyers and sellers are satisfied with the current price and quantity.
Step 2: The Equilibrium Point:
The equilibrium price is the price at which the demand curve and the supply curve intersect. This is the price at which the quantity demanded by consumers equals the quantity supplied by producers.
- Demand Curve: The demand curve shows the relationship between the price of a good and the quantity demanded, generally sloping downwards.
- Supply Curve: The supply curve shows the relationship between the price of a good and the quantity supplied, generally sloping upwards.
Step 3: Final Conclusion:
Market equilibrium occurs when the quantity demanded equals the quantity supplied at a particular price. At this point, there is no excess supply (surplus) or excess demand (shortage), and the market clears.