In a competitive market, what is the term for the point at which supply and demand come together (i.e., where quantity supplied equals quantity demanded)?

• A. A shift in the demand curve
• B. Market equilibrium (the equilibrium price and quantity)
• C. A price ceiling
• D. Allocative inefficiency

Answer: (B)

Verified step by step guidance

1. Understand that in a competitive market, the interaction between buyers (demand) and sellers (supply) determines the market outcome.
2. Identify that the point where the quantity demanded by consumers equals the quantity supplied by producers is a key concept in microeconomics.
3. Recognize that this point is called the market equilibrium, which consists of the equilibrium price and equilibrium quantity.
4. Note that at market equilibrium, there is no tendency for the price to change because the amount consumers want to buy exactly matches the amount producers want to sell.
5. Distinguish market equilibrium from other concepts such as a shift in the demand curve (which changes demand), a price ceiling (a government-imposed limit on price), and allocative inefficiency (a situation where resources are not optimally distributed).