Define market equilibrium. How is the equilibrium price determined?
Together, demand and supply determine the price and the quantity of goods that will be bought and sold in a market. The point where the supply curve and the demand curve cross is called the market equilibrium.
The price at which the quantity supplied of a good is equal to its quantity demanded is called the equilibrium price of the good.
You might also like to view...
Suppose the shift from AD0 to AD1 and from AS0 to AS1 is the result of fiscal policy. Which of the policies below could lead to these shifts?
i. An increase in government expenditure ii. A tax cut iii. A decrease in government expenditure iv. A tax hike A) iv only B) i and ii C) i and iv D) i only E) iii and iv
All of the following actions were taken by the Thai government to help Thailand maintain its peg against the dollar in the 1990s except
A) imposing restrictions on exports to the United States to prevent too many dollars from entering the economy. B) borrowing dollars from the International Monetary Fund in exchange for baht. C) increasing domestic interest rates to attract more foreign investors. D) buying baht on the foreign exchange market to support higher demand for the baht.
Easterlin (1968, 1987) argues that as the relative price of children rises,
(a) the average household demands fewer of them. (b) society, at large, demands fewer of them. (c) society, at large, demands more of them. (d) nothing happens since the demand for children is not influenced by price.
If there are both external benefits and external costs associated with the production and consumption of a good, and the external benefits are equal in magnitude to the external costs,
a. More than the efficient amount is being produced b. Less than the efficient amount is being produced c. the efficient amount is being produced d. We do not know whether the efficient amount, or more or less, is being produced.