alleryStart learning →What is the point of equilibrium in a market?
AThe price at which suppliers earn their largest possible profit
BThe price at which the government fixes the value of a good
CThe point at which quantity demanded equals quantity supplied
DThe point at which every producer has sold its entire capacity
Answer & Solution
Correct answer: C. The point at which quantity demanded equals quantity supplied
1. Plotting the demand curve and the supply curve on one graph shows them crossing at a certain quantity and price.
2. At that crossing point the quantity demanded equals the quantity supplied.
3. That point is the equilibrium, where there is a balance between what consumers will buy and what suppliers will make available.
4. Maximum profit and full capacity are not the test, since the balance of the two quantities is what defines the point.
5. A government-fixed price is an intervention, and equilibrium is reached by the market itself.
_Source: OpenStax Introduction to Business (CC BY 4.0), Ch 1 "Understanding Economic Systems and Business", section 1.6 Microeconomics: Zeroing in on Businesses and Consumers_
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