Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
At market equilibrium, the quantity demanded is always greater than the quantity supplied.
B
Shifts in demand or supply can lead to a new equilibrium price and quantity.
C
Market equilibrium ensures that all consumers are satisfied with their purchases.
D
An increase in supply, with demand held constant, typically lowers the equilibrium price.
E
Market equilibrium is static and does not change over time.
Understanding the Answer
Let's break down why this is correct
Answer
Market equilibrium happens when the amount buyers want to buy equals the amount sellers want to sell at a given price. If there is more supply than demand, the price falls until sellers are willing to sell less or buyers want more, moving toward equality. If demand exceeds supply, the price rises until sellers are willing to sell more or buyers want less, again moving toward equality. This balancing act is continuous: price changes until the quantity supplied equals the quantity demanded, and any shift in either supply or demand forces a new equilibrium price and quantity. For example, if a new technology makes a product cheaper, supply increases, pushing the price down until the new quantity supplied matches the new quantity demanded.
Detailed Explanation
When supply rises while demand stays the same, sellers have more goods to sell. Other options are incorrect because Equilibrium means quantity demanded equals quantity supplied, not that demand is greater; Shifts in demand or supply do change equilibrium.
Key Concepts
Market Equilibrium
Demand and Supply Dynamics
Price Elasticity
Topic
Market Equilibrium Analysis
Difficulty
hard level question
Cognitive Level
understand
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