Refer to the diagram. If this is a competitive market, price and quantity will move toward

Question

Quizplus · Accepted Answer

The intersection of the demand and supply curves represents the equilibrium price and quantity in a competitive market. In this case, the equilibrium price is $40 and the equilibrium quantity is 150. Any price higher than $40 would result in a quantity supplied greater than the quantity demanded, causing a surplus and eventually leading to a decrease in price. Any price lower than $40 would result in a quantity demanded greater than the quantity supplied, causing a shortage and eventually leading to an increase in price. Therefore, the market will naturally move to the equilibrium point where price is $40 and quantity is 150.

Refer to the Diagram