Market Equilibrium: a situation where demand and supply are equal at the current price is known as?

Market Equilibrium: a situation where demand and supply are equal at the current price is known as?

• A. Market Disequilibrium
• B. Market Equilibrium
• C. Shortage
• D. Surplus

Answer: (B)

When the quantity demanded equals the quantity supplied at the current price, the market clears and the price tends to be stable. This situation is called market equilibrium. It means there is no inherent pressure for the price to move up or down because the plans of buyers and sellers match. If demand were greater than supply, you'd have a shortage and prices would tend to rise to restore balance. If supply were greater than demand, you'd have a surplus and prices would tend to fall. Disequilibrium simply means the two quantities are not equal.

When the quantity demanded equals the quantity supplied at the current price, the market clears and the price tends to be stable. This situation is called market equilibrium. It means there is no inherent pressure for the price to move up or down because the plans of buyers and sellers match. If demand were greater than supply, you'd have a shortage and prices would tend to rise to restore balance. If supply were greater than demand, you'd have a surplus and prices would tend to fall. Disequilibrium simply means the two quantities are not equal.