Which term describes the price-quantity point where supply equals demand?

Which term describes the price-quantity point where supply equals demand?

• A. Variable costs
• B. Wants
• C. Demand
• D. Equilibrium price and quantity

Answer: (D)

The balance point where the market clears is called the equilibrium price and quantity. It’s found where the supply and demand conditions meet: the quantity producers are willing to offer at a given price equals the quantity buyers want to purchase. At this intersection, the market is stable because there isn’t pressure for prices to move, assuming other factors stay the same. If the price were higher than this point, a surplus would occur—the market would have more supply than demand. If the price were lower, a shortage would occur—the demand would outstrip supply. Other terms don’t describe this balance: variable costs are costs that vary with output, wants are desires rather than actual market quantities, and demand refers to the relationship between price and the quantity buyers are willing to purchase, not the balance point itself.

The balance point where the market clears is called the equilibrium price and quantity. It’s found where the supply and demand conditions meet: the quantity producers are willing to offer at a given price equals the quantity buyers want to purchase. At this intersection, the market is stable because there isn’t pressure for prices to move, assuming other factors stay the same. If the price were higher than this point, a surplus would occur—the market would have more supply than demand. If the price were lower, a shortage would occur—the demand would outstrip supply. Other terms don’t describe this balance: variable costs are costs that vary with output, wants are desires rather than actual market quantities, and demand refers to the relationship between price and the quantity buyers are willing to purchase, not the balance point itself.