Multiple Choice
In a standard supply-and-demand model, a decrease in demand while holding supply constant results in what changes in equilibrium price and equilibrium quantity?
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3. The Market Forces of Supply and Demand
Market Equilibrium
Multiple Choice
In a competitive market, what is the term for the point at which supply and demand meet?
A
Market equilibrium (the equilibrium price and quantity)
B
Price ceiling
C
A surplus (excess supply)
D
A shortage (excess demand)
Verified step by step guidance1
Understand that in a competitive market, the interaction between buyers (demand) and sellers (supply) determines the price and quantity of goods exchanged.
Identify that the point where the quantity demanded by consumers equals the quantity supplied by producers is crucial for market balance.
Recognize that this point is called the market equilibrium, characterized by the equilibrium price and equilibrium quantity.
Note that if the price is above this equilibrium, a surplus (excess supply) occurs, and if the price is below, a shortage (excess demand) happens.
Conclude that the term for the point where supply and demand meet is 'market equilibrium,' which ensures no inherent pressure for price to change.
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