Multiple Choice
Which term best describes a situation in a market where the forces of supply and demand result in an inefficient allocation of resources?
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3. The Market Forces of Supply and Demand
Market Equilibrium
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Given the following demand and supply schedules for the market for pizza:Price (per pizza): \$5, \$10, \$15, \$20Quantity Demanded: 100, 80, 60, 40Quantity Supplied: 40, 60, 80, 100At what price does market equilibrium occur?
A
\$20
B
\$10
C
\$15
D
\$5
Verified step by step guidance1
Understand that market equilibrium occurs where quantity demanded equals quantity supplied.
Look at the demand schedule and supply schedule to find the price at which the quantity demanded matches the quantity supplied.
Compare the quantities at each price: for \$5, demand is 100 and supply is 40; for \$10, demand is 80 and supply is 60; for \$15, demand is 60 and supply is 80; for \$20, demand is 40 and supply is 100.
Identify the price where quantity demanded equals quantity supplied or is closest to being equal.
Conclude that the equilibrium price is the one where the market clears, meaning quantity demanded equals quantity supplied.
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