The market clearing price in a competitive market:
A)is one that will be established immediately when buyers and sellers come together to the market.
B)would persist if actually reached, but doesn't have much significance in real life, due to the lack of any forces tending to push the price to this level.
C)has no significance at all in real life because analysis of competitive markets takes no account of incomes, tastes, or other factors that influence demand.
D)will tend to be reached, although not necessarily immediately, because of the competitive forces set up whenever price is at any level other than equilibrium.
E)has no application except where everyone is an "economic person" (homo economicus).

Question

Quizplus · Accepted Answer

The market clearing price in a competitive market is the price at which the quantity of goods supplied equals the quantity of goods demanded. In a competitive market, sellers will try to offer their goods at the highest possible price, while buyers will try to buy at the lowest possible price. This creates a competitive pressure that will tend to push the price towards the market clearing price. While it may not happen immediately, over time market forces will tend to converge towards the market clearing price.

The Market Clearing Price in a Competitive Market