Chapter5: Supply, Demand, And Price: Applications
Section: Chapter Questions
Problem 4WNG
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Question
Why is the price at which the quantity demanded equals the quantity supplied the equilibrium price?
Expert Solution
Step 1
If a market is at its equilibrium, that is where quantity supplied and the quantity demand meet each other. As you can see in the figure given below the point E, where the supply curve and demand curve intersects each other. In the other way, at equilibrium the quantity supplied is same as quantity demanded.
However, if a market is not at equilibrium that is if there is excess demand or excess supply in the market then the economic pressures are there to move the market towards equilibrium.
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