Suppose that we illustrate demand and supply with quantity on the horizontal axis and price on the vertical axis. The equilibrium remains unchanged unless an exogenous variable changes.

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Quizplus · Accepted Answer

This statement is true. The equilibrium point, where supply and demand intersect, represents the market clearing price and quantity. As long as there are no changes in the exogenous variables, such as government policies, consumer preferences or technology, the equilibrium remains unchanged. If any of these variables change, then the demand or supply curve may shift, causing a new equilibrium point. The statement is true. In a graph illustrating demand and supply, the equilibrium point is where the two curves intersect. This point represents the market-clearing price and quantity. The equilibrium will only change if there is a shift in the demand or supply curves, which can result from changes in exogenous variables such as technology, input prices, or government policies.

Suppose That We Illustrate Demand and Supply with Quantity on the Horizontal