Question

When market supply is equal to market demand, then this situation is called

• A. Equilibrium
• B. Excess demand
• C. Excess supply
• D. None of these

Hint:

Market equilibrium occurs when supply equals demand, leading to neither surplus nor shortage of goods.

Answer 1

The Correct Option is A

Step 1: Understanding market equilibrium.
In economics, market equilibrium occurs when the quantity supplied is equal to the quantity demanded at a given price level. This state of balance ensures there is neither a surplus nor a shortage of goods.

Step 2: Analyzing the options.
(A) Equilibrium: Correct. Equilibrium is the point where market supply equals market demand.
(B) Excess demand: This occurs when demand exceeds supply, leading to shortages.
(C) Excess supply: This occurs when supply exceeds demand, leading to surpluses.
(D) None of these: This is incorrect because the correct answer is (A) Equilibrium.

Step 3: Conclusion.
The correct answer is (A) Equilibrium, where supply equals demand in the market.