What is equilibrium?
A. A good for which, other things equal, an increase in income leads to an increase in demand
B. A situation in which the price has reached the level where quantity demanded equals quantity supplied***
C. A curved graph that illustrates the theory that, if tax rates rise beyond a certain level, they discourage economic growth, thereby reducing government revenues
D. A tax on goods produced abroad and sold domestically
I agree.
Thank you! I have to turn in this assignment by midnight and that was my last question!
You're welcome. :-)\
The correct answer is B. Equilibrium refers to a situation where the price of a good or service has reached a level where the quantity demanded by consumers equals the quantity supplied by producers. In simpler terms, it is a balance between supply and demand in the market.
To better understand how equilibrium is determined, we can look at the concept of supply and demand. The demand for a product represents the quantity that consumers are willing and able to buy at different prices, while the supply represents the quantity that producers are willing and able to sell at different prices.
When the market is in equilibrium, the quantity demanded by consumers is exactly equal to the quantity supplied by producers at a specific price. This means that there is neither a shortage nor a surplus of the product in the market. Any changes in price will result in either excess demand (shortage) or excess supply (surplus), which will eventually lead to adjustments until a new equilibrium is reached.
To determine the equilibrium price and quantity, economists use a supply and demand graph, where the intersection of the supply and demand curves represents the equilibrium point. The point where quantity demanded equals quantity supplied is known as the equilibrium quantity, and the price at that point is known as the equilibrium price.
So, in summary, equilibrium is a situation in which the price of a good or service has reached the level where quantity demanded equals quantity supplied, resulting in a balance between supply and demand in the market.