Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
The price at which quantity supplied equals quantity demanded
B
The highest price consumers are willing to pay
C
The price where total supply exceeds total demand
D
The price at which producers make maximum profit
Understanding the Answer
Let's break down why this is correct
Answer
The equilibrium price level is the point where the total amount of goods and services that all businesses want to sell matches the total amount that consumers want to buy. In this situation, there is no excess supply or demand, meaning prices remain stable. For example, if a bakery produces 100 loaves of bread and consumers are willing to buy exactly 100 loaves at a price of $2 each, that price is the equilibrium price. If the price were higher, people might not buy as many loaves, and if it were lower, the bakery might not make enough to cover costs. Thus, the equilibrium price helps ensure that the market operates smoothly, balancing what is produced with what is purchased.
Detailed Explanation
The equilibrium price is where the amount of goods people want to buy equals the amount producers want to sell. Other options are incorrect because This option suggests the highest price people will pay, but that doesn't mean everyone can buy what they want; This option says supply is more than demand, which creates a surplus.
Key Concepts
Equilibrium Price Level
Topic
Aggregate Supply and Demand Analysis
Difficulty
easy level question
Cognitive Level
understand
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