ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The interaction of supply and demand determines a market equilibrium in which both buyers and sellers are price-takers, called a competitive equilibrium. Prices and quantities in competitive equilibrium change in response to supply and demand shocks.

Detailed explanation-2: -Changes in the equilibrium price occur when either demand or supply, or both, shift or move.

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: -Competitive equilibrium is achieved when profit-maximizing producers and utility-maximizing consumers settle on a price that suits all parties. At this equilibrium price, the quantity supplied by producers is equal to the quantity demanded by consumers.

Detailed explanation-5: -Market equilibrium occurs when market supply equals market demand. The equilibrium price of a good or service, therefore, is its price when the supply of it equals the demand for it.