In a competitive equilibrium model, prices are determined freely by market supply and demand.

Question

Quizplus · Accepted Answer

In a competitive equilibrium model, prices are determined by the intersection of market supply and demand curves, which reflects the preferences of consumers and the costs of producers. There is no external intervention, such as price controls or subsidies, that influence the price level. Therefore, the prices are freely determined by the market forces of supply and demand.

In a Competitive Equilibrium Model, Prices Are Determined Freely by Market