The price where supply and demand are equal

The price where supply and demand are equal

• A. Demand
• B. Excess demand
• C. Supply
• D. Equilibrium price

Answer: (D)

The main idea is the price that balances the two sides of the market. It’s the equilibrium price—the point on the interaction of the supply and demand curves where they intersect. At this price, the quantity that buyers want to purchase equals the quantity that sellers are willing to supply, so the market clears and there’s no pressure for the price to move (assuming other factors stay constant). If the price were higher, a surplus would exist because producers would supply more than buyers want. If the price were lower, a shortage would occur because buyers want more than producers are willing to offer. This price also sets the corresponding quantity traded, the equilibrium quantity.

The main idea is the price that balances the two sides of the market. It’s the equilibrium price—the point on the interaction of the supply and demand curves where they intersect. At this price, the quantity that buyers want to purchase equals the quantity that sellers are willing to supply, so the market clears and there’s no pressure for the price to move (assuming other factors stay constant). If the price were higher, a surplus would exist because producers would supply more than buyers want. If the price were lower, a shortage would occur because buyers want more than producers are willing to offer. This price also sets the corresponding quantity traded, the equilibrium quantity.