3.1.2.5 The determination of equilibrium market prices NOTES

What happens to the equilibrium price when there is an increase in demand, assuming supply remains constant?

• The equilibrium price decreases.

• The equilibrium price increases.

• The equilibrium price remains unchanged.

• There is not enough information to determine.

What is meant by "market equilibrium" in the context of supply and demand?

• It is the point where the quantity demanded exceeds the quantity supplied.

• It is the point where the quantity supplied exceeds the quantity demanded.

• It is the point where the quantity demanded equals the quantity supplied.

• It is the point where the market experiences maximum volatility.

What defines a disequilibrium in a market?

• When supply equals demand.

• When demand exceeds supply.

• When supply exceeds demand.

• Both B and C are correct.

Which of the following scenarios represents excess demand?

• Equilibrium price is stable and quantity demanded equals quantity supplied.

• Quantity demanded is less than quantity supplied at the current price.

• Quantity demanded is greater than quantity supplied at the current price.

• Supply and demand curves intersect at multiple points.

How does excess supply affect the market price?

• It increases the market price.

• It decreases the market price.

• It does not affect the market price.

• It initially increases, then decreases the market price.

What is likely to happen if the price of a good is set above the equilibrium price?

• Excess demand will occur.

• Excess supply will occur.

• Demand will increase.

• Supply will decrease.

What mechanism drives the price towards equilibrium in a free market?

• Government regulations.

• Price controls.

• The interaction of supply and demand.

• Consumer preferences alone.

In the context of supply and demand, what does the term "price mechanism" refer to?

• A government tool for controlling prices.

• The process by which prices adjust to clear the difference between supply and demand.

• A method for calculating optimal pricing strategies.

• The legal framework establishing minimum and maximum prices.

What results from a decrease in supply, assuming demand remains constant?

• Decrease in equilibrium price.

• Increase in equilibrium price.

• No change in equilibrium price.

• Unpredictable changes in equilibrium price.

Which of the following best describes a situation of disequilibrium caused by a price ceiling?

• Excess demand.

• Excess supply.

• Equilibrium.

• Decreased market activity.