7 Market equilibrium

In the price mechanism, what is the primary objective of sellers?

• To achieve the lowest possible prices for consumers.

• To maximize their profits.

• To drive down prices through haggling.

• To establish a price that is agreeable to all buyers.

Which of the following best describes market equilibrium?

• A situation where demand is greater than supply.

• A situation where supply is greater than demand.

• The price at which the quantity demanded equals the quantity supplied.

• A state where prices are constantly changing.

Consider a market where at a price of $25, the quantity demanded is 15,000 units and the quantity supplied is 5,000 units. What is the market situation?

• An excess supply of 10,000 units.

• An excess demand of 10,000 units.

• Market equilibrium.

• A shortage of 5,000 units.

In a market, if the price is $45, leading to a quantity demanded of 7,000 units and a quantity supplied of 18,000 units, what is the outcome?

• A shortage of 11,000 units.

• A surplus of 11,000 units.

• Market equilibrium.

• An excess demand of 7,000 units.

If a market is in equlibrium and then the good becomes more fashionable what would we expect to happen to price and quantity at a new equilibrium?

• P down and Q up

• P up and Q up

• P down and Q down

• P up and Q down

What will happen to price if there 1. excess demand and 2. excess supply?

If a market is in equilibrium and the government gives the good a subsidy what will happen to the price and quantity?

• P up and Q up

• P down and Q up

• P up and Q down

• P down and Q down