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Price equilibrium, or market equilibrium, occurs when the quantity of a good or service demanded by consumers equals the quantity supplied by producers at a specific price level. At this point, there is no tendency for the price to change, as the market clears, meaning all goods produced are sold. If the price is above equilibrium, excess supply leads to downward pressure on prices, while prices below equilibrium create excess demand, pushing prices up. Thus, market equilibrium represents a stable state in economic transactions.

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3w ago

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Related Questions

Where is the price ceiling located on a graph depicting market equilibrium?

The price ceiling is located below the equilibrium price on a graph depicting market equilibrium.


What happens when the market price is lower than the equilibrium price?

When the market price is lower than the equilibrium price the price of the product will continue to rise. The price will rise until it equal the equilibrium price.


What happens when the equilibrium price is lower than the market price?

When the market price is lower than the equilibrium price the price of the product will continue to rise. The price will rise until it equal the equilibrium price.


When the market price is above equilibrium price the market price will be driven up by?

A


A shortage will develop when?

The market price is below the equilibrium price.


What is the impact of a shortage on the equilibrium price and quantity in an economic market?

A shortage in an economic market leads to an increase in the equilibrium price and a decrease in the equilibrium quantity.


What is another term for market price?

equilibrium price


What is another word for market price?

equilibrium price


Why price ceiling and price floor is binding?

A price ceiling is binding when it is below the equilibrium price. It is the legal maximum price, so the market wants to reach equilibrium (which is above that) but can't legally. If it were above the equilibrium price it would not be binding because the market would reach equilibrium and the ceiling would have no effect. A price floor is binding when it is above the equilibrium price. You can use similar reasoning to that above. It is the legal minimum price. the market wants to reach equilibrium below that but can't legally.


Market clearing price?

The price that exists when a market is clear of shortage and surplus, or is in equilibrium.


What are the differences between a market in equilibrium and a market in disequilibrium?

equilibrium is the responsiveness of quantity demand to a change in price.


When market price is above equilibrium price?

When supply and demand are balanced