Markets tend toward equilibrium and, as a result, will tend to eliminate shortages and surpluses. Why?
Markets tend toward equilibrium because when a shortage exists, consumers who are unhappy about not being able to purchase the products or services they want will tend to bid the prices higher, moving the market toward equilibrium. If a surplus exists, suppliers are unhappy about not being able to sell the quantity of goods or services they wish, and will tend to lower prices in order to persuade consumers to purchase more goods and services.
You might also like to view...
Which of the following is true?
A) Potential GDP fluctuates around nominal GDP. B) Nominal GDP fluctuates around real GDP. C) Real GDP never equals potential GDP. D) The Okun Gaps are much larger than the Lucas Wedge. E) Real GDP fluctuates around potential GDP.
As capital deepening occurs, there will be increased real wages and economic growth
Indicate whether the statement is true or false
Adam Smith
a. and David Ricardo both opposed free trade. b. opposed free trade, but David Ricardo supported it. c. supported free trade, but David Ricardo opposed it. d. and David Ricardo both supported free trade.
The value of $100 left in a certificate of deposit for four years that earns 4.5% annually will be:
A. $117.00 B. $145.00 C. $119.25 D. $120.00