Equilibrium price is the price where quantity supplied equals quantity demanded.

Equilibrium price is the price where quantity supplied equals quantity demanded.

• A. Quantity supplied equals quantity demanded
• B. the price is determined by the government
• C. Quantity demanded is zero
• D. The quantity supplied is zero

Answer: (A)

Equilibrium price is the price at which the quantity supplied equals the quantity demanded; the market clears because the plans of buyers and sellers match at that point. When price is at this level, the amount people want to buy exactly matches the amount producers want to sell, so there’s no inherent pressure for the price to move. If the price were higher, there would be more supplied than demanded, creating a surplus and pressure to fall. If the price were lower, there would be more demanded than supplied, creating a shortage and pressure to rise. This is why the statement that best describes equilibrium is the one where quantity supplied equals quantity demanded. The other ideas don’t describe how equilibrium works: a government-set price is not how equilibrium is determined in a free market, and equilibrium does not involve zero demand or zero supply.

Equilibrium price is the price at which the quantity supplied equals the quantity demanded; the market clears because the plans of buyers and sellers match at that point. When price is at this level, the amount people want to buy exactly matches the amount producers want to sell, so there’s no inherent pressure for the price to move.

If the price were higher, there would be more supplied than demanded, creating a surplus and pressure to fall. If the price were lower, there would be more demanded than supplied, creating a shortage and pressure to rise. This is why the statement that best describes equilibrium is the one where quantity supplied equals quantity demanded.

The other ideas don’t describe how equilibrium works: a government-set price is not how equilibrium is determined in a free market, and equilibrium does not involve zero demand or zero supply.