In financial markets, actual market prices sometimes diverge from the equilibrium price because
A) supply is often greater than demand.
B) demand is often greater than supply.
C) supply is equal to demand.
D) of geographical and temporal fragmentation.

Question

Quizplus · Accepted Answer

Geographical and temporal fragmentation refer to differences in supply and demand across different locations and time periods. This can lead to differences in market prices that temporarily diverge from the equilibrium price. In the long run, however, market forces should work to bring prices back to equilibrium. Choices A, B, and C relate to the basic principles of supply and demand and do not provide a sufficient explanation for the phenomenon of diverging market prices.

In Financial Markets, Actual Market Prices Sometimes Diverge from the Equilibrium