Explain the relationship between a market equilibrium and a social optimum.

Answered: Explain the relationship between a…

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter4: Markets In Action

Section: Chapter Questions

Problem 20SQ

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Explain the relationship between a market equilibrium and a social optimum.

Definition Video Formula Definition Phenomenon in which market supply and demand balance each other. Market equilibrium is the economic state in which the market demand curve intersects the market supply curve, giving us the equilibrium price and equilibrium quantity for which a commodity can be sold and purchased in an economy. When market equilibrium is achieved, it suggests that all resources have been allocated efficiently and that there is just a distribution of income and resources in the economy. Video Formula

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Introduction

Market equilibrium is when demand equals supply and a social optimum is when marginal social cost is equal to marginal social benefit.

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