BUSINESS ADMINISTRATION
BUSINESS ECONOMICS
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
1.shortage
|
|
|
2.market mechanism
|
|
|
3.surplus
|
|
|
4.none of the above
|
Detailed explanation-1: -The phrase “equilibrium price” is often used interchangeably with “market clearing price.” Both refer to the price at which the number of goods for sale is exactly equal to the quantity that buyers wish to purchase. In other words, it is the price at which the market is in equilibrium.
Detailed explanation-2: -In economics, market clearing is the process by which, in an economic market, the supply of whatever is traded is equated to the demand so that there is no excess supply or demand.
Detailed explanation-3: -Equilibrium price is also called market clearing price because at this price the exact quantity that producers take to market will be bought by consumers, and there will be nothing ‘left over’.
Detailed explanation-4: -When market is in equilibrium there is a balance of quantity demanded and quantity supplied are the same. Hence, because quantity demanded = quantity supplied there are no shortages in the market and the price is fixed which clears the market.