ECONOMICS
DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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They help to ration available goods and services.
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Equilibrium prices provide incentives for people to produce goods and services.
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They provide information about producer costs and consumer wants.
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They help to create competition to drive prices upwards in order to create necessary surpluses.
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Detailed explanation-1: -If price falls below the market clearing price, buyers will buy up all of the available goods, causing a shortage in the market. This shortage causes prices to rise, until they reach the equilibrium price.
Detailed explanation-2: -Shortages, surpluses. Which of the following will most likely result in a decrease in a product’s market-clearing or equilibrium price? An increase in demand, but no change in supply.
Detailed explanation-3: -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.
Detailed explanation-4: -Equilibrium price. When a product exchange occurs, the agreed upon price is called an equilibrium price, or a market clearing price. Graphically, this price occurs at the intersection of demand and supply as presented in Image 1.