If the price of an item can freely adjust, a market will
A) always move towards equilibrium.
B) always have an excess quantity demanded.
C) always have an excess quantity supplied.
D) never move towards equilibrium because prices are always increasing.

Question

Quizplus · Accepted Answer

When the price of an item can freely adjust, the market will naturally move towards the equilibrium price where quantity supplied equals quantity demanded. This is because at any price above the equilibrium, there will be excess quantity supplied and at any price below the equilibrium, there will be excess quantity demanded. As a result, market forces will push the price towards the equilibrium until the two quantities are equal.

If the Price of an Item Can Freely Adjust, a Market