Question 1

In markets,prices move toward equilibrium because of

Accepted Answer

Prices move toward equilibrium because of the actions of buyers and sellers. As buyers and sellers interact in a marketplace, they respond to changes in supply and demand by adjusting the price at which goods and services are offered. This process continues until a point of equilibrium is reached, where the price is such that the quantity supplied equals the quantity demanded. Government regulations and competition among sellers can influence the behavior of buyers and sellers, but ultimately it is their actions that determine market outcomes. Buyers' ability to affect market outcomes is also a factor, but it is ultimately the interaction of all participants that determines the equilibrium price.

Question 2

Which of the following events must cause equilibrium quantity to fall?

Accepted Answer

If both demand and supply decrease, then the equilibrium quantity must fall. This is because there is a decrease in both the amount consumers are willing and able to buy (demand) and the amount producers are willing and able to sell (supply). This double-dip reduction in the quantity of goods and services available in the market will ultimately lead to a decrease in the equilibrium quantity.

Question 3

Which of the following events must cause equilibrium price to rise?

Accepted Answer

When demand increases and supply decreases, the quantity demanded exceeds the quantity supplied, creating a shortage. This shortage leads to an increase in the equilibrium price as buyers compete to purchase the limited available quantity at a higher price.

Question 4

Equilibrium price must increase when demand

Accepted Answer

According to the law of demand and supply, when demand increases (or stays constant) and supply decreases, the equilibrium price will increase. Therefore, option B is correct as it includes all the possible scenarios in which the equilibrium price will increase.

Question 5

If the demand for a product increases,then we would expect equilibrium price

Accepted Answer

An increase in demand means there is more interest in the product and consumers are willing to pay a higher price for it. This puts upward pressure on the equilibrium price, resulting in an increase. The increase in demand also means that suppliers will produce more of the product, resulting in an increase in equilibrium quantity. Therefore, both the equilibrium price and quantity will increase.

Question 6

The unique point at which the supply and demand curves intersect is called

Accepted Answer

The point at which supply and demand curves intersect is called equilibrium. At this point, the quantity of goods or services that buyers want to purchase equals the quantity that sellers want to sell.

Question 7

At the equilibrium price,the quantity of the good that buyers are willing and able to buy

Accepted Answer

At the equilibrium price, the quantity demanded and the quantity supplied are equal, meaning that the quantity of the good that buyers are willing and able to buy exactly equals the quantity that sellers are willing and able to sell. Therefore, choice B is correct. Choices A and C are incorrect because they suggest either an excess demand or an excess supply situation, which are not consistent with the definition of equilibrium. Choice D is also incorrect because only one of the options can be correct, not both.

Question 8

The dictionary defines equilibrium as a situation in which forces

Accepted Answer

Equilibrium refers to a state of balance between opposing forces or influences. Therefore, option A - "forces are in balance" is the best choice as it accurately describes the meaning of equilibrium.

Question 9

Equilibrium quantity must decrease when demand

Accepted Answer

According to the law of demand, as price decreases, quantity demanded increases. Therefore, if demand decreases while supply stays the same, then the equilibrium quantity must decrease. Similarly, if both demand and supply decrease, the equilibrium quantity must also decrease. On the other hand, if demand increases and supply does not change or if demand does not change and supply increases, the equilibrium quantity will increase.

Question 10

Which of the following events must cause equilibrium price to fall?

Accepted Answer

If demand decreases and supply increases, there will be an excess supply of the good, leading to a decrease in price until equilibrium is reached.

Question 11

Buyers are able to buy all they want to buy and sellers are able to sell all they want to sell at

Accepted Answer

At the equilibrium price, the quantity demanded by buyers equals the quantity supplied by sellers, allowing both parties to transact all they desire without surplus or shortage.

Question 12

Another term for equilibrium price is

Accepted Answer

Equilibrium price is also referred to as the market-clearing price because it is the price at which the quantity demanded by consumers equals the quantity supplied by producers, resulting in an equilibrium where there is no excess supply or demand. The other options (dynamic price, quantity-defining price, and balance price) are not commonly used to refer to the equilibrium price.

Question 13

Which of the following events must cause equilibrium quantity to rise?

Accepted Answer

When demand and supply both increase, the equilibrium quantity must rise because both factors are pushing for more goods to be produced and sold in the market. This results in an increase in the quantity demanded and supplied, leading to a higher equilibrium quantity.

Question 14

When supply and demand both increase,equilibrium

Accepted Answer

When both supply and demand increase, the equilibrium quantity will definitely increase, but the effect on price is uncertain as it depends on the relative magnitudes of the shifts in supply and demand.

Question 15

In a given market,how are the equilibrium price and the market-clearing price related?

Accepted Answer

Equilibrium price is the price at which the quantity demanded of a good or service equals the quantity supplied, resulting in no excess supply or demand. The market-clearing price is the price at which all units of a good or service are sold in a given market, with no excess supply or demand. Since both of these prices occur when supply and demand are in balance, they are the same price. Therefore, option B is the correct answer.

Question 16

If the demand for a product decreases,then we would expect equilibrium price

Accepted Answer

When demand decreases, the equilibrium price and quantity both decrease because there is less willingness to buy the product at previous prices, leading to a surplus that drives prices down and reduces the quantity sold.

Question 17

If the supply of a product increases,then we would expect equilibrium price

Accepted Answer

According to the law of supply, an increase in supply will lead to a decrease in price. This is because with more supply available, producers will have to lower their prices in order to entice buyers to purchase their goods. As a result, the equilibrium price (where supply and demand intersect) will decrease. However, the increase in supply will also lead to an increase in the equilibrium quantity, since buyers will be willing and able to purchase more of the product at the lower price. Therefore, the correct answer is B - a decrease in price and an increase in quantity.

Question 18

Equilibrium quantity must increase when demand

Accepted Answer

According to the law of demand, when the demand for a good/service increases, the equilibrium quantity will also increase, given that the supply remains constant. Similarly, when the supply increases, the equilibrium quantity will increase, keeping the demand constant. Finally, when both demand and supply increase, the equilibrium quantity will definitely increase. Hence, option A is the correct choice.

Question 19

Equilibrium price must decrease when demand

Accepted Answer

Equilibrium price decreases when demand decreases and supply remains constant, when demand is constant and supply increases, and when demand decreases while supply increases simultaneously.

Question 20

If the supply of a product decreases,then we would expect equilibrium price

Accepted Answer

According to the law of supply and demand, when the supply of a product decreases, the demand for the product remains constant, and there is a shortage of the product. Therefore, the equilibrium price will increase as buyers will be willing to pay a higher price to obtain the reduced quantity of the product. At the same time, equilibrium quantity will decrease as sellers will produce and offer less of the product due to the decrease in supply.

Quiz 4: The Market Forces of Supply and Demand: Supply and Demand Together