If markets are in equilibrium, which of the following conditions will exist?

• A. Quantity demanded equals quantity supplied
• B. Price is above the equilibrium price
• C. Firms are unable to sell all they want at the current price
• D. There is a persistent shortage in the market

Answer: (A)

Verified step by step guidance

1. Understand the concept of market equilibrium: it occurs when the quantity demanded by consumers equals the quantity supplied by producers at a certain price level.
2. Recall that at equilibrium, there is no tendency for the price to change because the market clears—meaning no excess supply or excess demand exists.
3. Analyze each condition given: if price is above equilibrium, there will be excess supply (surplus), so the market is not in equilibrium.
4. If firms are unable to sell all they want at the current price, it implies excess supply, which contradicts equilibrium.
5. If there is a persistent shortage, quantity demanded exceeds quantity supplied, so the market is not in equilibrium.