In the context of market equilibrium, what does the intersection between the demand and supply curves represent?

• A. The market price and quantity at which quantity demanded equals quantity supplied
• B. The highest price consumers are willing to pay
• C. The point where consumer surplus is zero
• D. The maximum possible profit for producers

Answer: (A)

Verified step by step guidance

1. Understand that the demand curve shows the relationship between price and quantity demanded by consumers, typically downward sloping, meaning consumers buy more at lower prices.
2. Recognize that the supply curve shows the relationship between price and quantity supplied by producers, usually upward sloping, meaning producers supply more at higher prices.
3. Identify that the intersection point of the demand and supply curves is where the quantity demanded equals the quantity supplied.
4. Interpret this intersection as the market equilibrium, which determines the equilibrium price and equilibrium quantity in the market.
5. Conclude that at this equilibrium price, there is no shortage or surplus, meaning the market clears efficiently.