1.2.6 Determination of Market Prices

Question 1

Define:
1. Equilibrium price
2. Equilibrium quantity

Answer 1

1. Equilibrium price: market clearing price where all units of a good or service are purchased at the given price level
2. Equilibrium quantity: when quantity demanded is equal to the quantity being supplied

Question 2

Define market equilibrium.

Answer 2

Market equilibrium is a state in which the quantity of a good or service that is being supplied is equal to the quantity that is being demanded by consumers at the current price. This means that there is no excess supply or excess demand for the good or service, and the market is in balance.