ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The market clearing price is reached through price discovery. Both buyers and sellers will attempt to find the most advantageous prices for their interests. Eventually, the market will reach equilibrium at the price point where the number of willing buyers is equal to the number of willing sellers.

Detailed explanation-2: -In any market transaction between a seller and a buyer, the price of the good or service is determined by supply and demand in a market. Supply and demand are in turn determined by technology and the conditions under which people operate.

Detailed explanation-3: -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.

Detailed explanation-4: -Buyers seek the lowest possible price for the good, sellers seek the highest price for the good, and these interests intersect at the market clearing price.

Detailed explanation-5: -Competition among buyers increases prices and allocates goods and services to those people who are willing and able to pay the most for them. Competition among sellers results in lower costs and prices, higher product quality, and better customer service.