ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A market-clearing price is the price of a good or service at which quantity supplied is equal to quantity demanded, also called the equilibrium price.

Detailed explanation-2: -The price at which the quantity demanded equals the quantity supplied is the equilibrium price because at this price the plans of producers and consumers are coordinated and there is no influence on the price to change.

Detailed explanation-3: -An equilibrium price, also known as a market-clearing price, is the consumer cost assigned to some product or service such that supply and demand are equal, or close to equal. The manufacturer or vendor can sell all the units they want to move and the customer can access all the units they want to buy.

Detailed explanation-4: -Hence the supply and demand are balanced. How to calculate equilibrium quantity? It can be calculated by solving the demand and supply function (Qa – bP = x + yP). Solving the equation when the supply equals the demand gives an equilibrium price.

Detailed explanation-5: -Equilibrium quantity is when there is no shortage or surplus of a product in the market. Supply and demand intersect, meaning the amount of an item that consumers want to buy is equal to the amount being supplied by its producers.