ECONOMICS
MARKET FAILURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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there is maximum output at minimum cost.
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prices are at their lowest possible level.
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there is no tendency for the market price to change.
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consumer satisfaction is maximised.
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Detailed explanation-1: -A market is in equilibrium if at the market price the quantity demanded is equal to the quantity supplied. The price at which the quantity demanded is equal to the quantity supplied is called the equilibrium price or market clearing price, and the corresponding quantity is the equilibrium quantity.
Detailed explanation-2: -At any other price, the quantity demanded does not equal the quantity supplied, so the market is not in equilibrium at that price. The word equilibrium means balance. If a market is at its equilibrium price and quantity, then it has no reason to move away from that point.
Detailed explanation-3: -At the equilibrium price, there is no shortage or surplus: The quantity of the good that buyers are willing to buy equals the quantity that sellers are willing to sell. Buyers can buy the quantity they want to buy at the market price, and sellers can sell the quantity they want to sell at the market price.
Detailed explanation-4: -Changes in either demand or supply cause changes in market equilibrium. Several forces bringing about changes in demand and supply are constantly working which cause changes in market equilibrium, that is, equilibrium prices and quantities. The demand may increase or decrease, the supply curves remaining unchanged.