BUSINESS ADMINISTRATION
BUSINESS ECONOMICS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Supply determines market price because the seller sets the price.
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The price is determined by the highest price consumers are willing to pay.
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The price is determined by the lowest price producers are willing to accept.
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The market clearing price is where quantity demanded is equal to quantity supplied.
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Detailed explanation-1: -Price is dependent on the interaction between demand and supply components of a market. Demand and supply represent the willingness of consumers and producers to engage in buying and selling. An exchange of a product takes place when buyers and sellers can agree upon a price.
Detailed explanation-2: -A decrease in demand will cause the equilibrium price to fall; quantity supplied will decrease. An increase in supply, all other things unchanged, will cause the equilibrium price to fall; quantity demanded will increase. A decrease in supply will cause the equilibrium price to rise; quantity demanded will decrease.
Detailed explanation-3: -The equilibrium is the only price where quantity demanded is equal to quantity supplied.
Detailed explanation-4: -The market-clearing price is the price at which the quantity supplied equals the quantity demanded. This price is the only one that balances, or “clears, ” the market. Market competition tends to move prices toward market-clearing levels.