Refer to Figure 4-7. The equilibrium price and quantity are, respectively, which of the following?

• A. the price at which excess supply exists, and the maximum possible quantity
• B. the highest price on the demand curve and the lowest quantity on the supply curve
• C. the lowest price on the supply curve and the highest quantity on the demand curve
• D. the price at which the quantity demanded equals the quantity supplied, and the corresponding quantity

Answer: (D)

Verified step by step guidance

1. Understand that the equilibrium price in a market is the price at which the quantity demanded by consumers equals the quantity supplied by producers.
2. Identify the demand curve, which shows the relationship between price and quantity demanded, typically downward sloping.
3. Identify the supply curve, which shows the relationship between price and quantity supplied, typically upward sloping.
4. Find the point where the demand curve and supply curve intersect; this intersection represents the equilibrium price and quantity.
5. At this equilibrium point, the price is such that the amount consumers want to buy exactly matches the amount producers want to sell, ensuring no excess supply or demand.