1) When quantity demanded equals quantity supplied,
A) there must be no government intervention in the market.
B) the demand curve must be the same as the supply curve.
C) the market is in equilibrium.
D) all of the above
The Correct Answer and Explanation is :
The correct answer is:
C) the market is in equilibrium.
Explanation:
When quantity demanded equals quantity supplied, it means the market is at an equilibrium point. At this point, the price at which goods are being offered is exactly the one that consumers are willing to pay, so the amount of goods consumers want to buy equals the amount producers are willing to sell.
Why the other options are incorrect:
A) “There must be no government intervention in the market.” – This statement is incorrect because the presence of government intervention (such as subsidies, taxes, or price controls) does not necessarily prevent the market from reaching an equilibrium. Government intervention can shift the demand or supply curve, thus changing the equilibrium position, but an equilibrium can still exist under these conditions.
B) “The demand curve must be the same as the supply curve.” – This is incorrect because the demand curve and the supply curve represent two different sets of behaviors. The demand curve shows the relationship between price and the quantity of a good that consumers are willing to buy, while the supply curve shows the relationship between price and the quantity that producers are willing to sell. These curves typically intersect at the equilibrium point, but they are not the same.
D) “All of the above” – Since options A and B are incorrect, option D cannot be correct.
Additional Information:
At equilibrium, the market forces of supply and demand are balanced, leading to price stability unless external factors cause shifts in either curve. For example, an increase in production costs might shift the supply curve upwards, leading to higher prices and a new equilibrium point. Similarly, a change in consumer preferences can shift the demand curve, adjusting the equilibrium quantity and price.
This concept is fundamental in economics because it helps explain how prices are determined in markets and how markets respond to changes in economic conditions.
Image Generation:
Let’s generate an image that visually represents this concept of market equilibrium.
{
"prompt": "A detailed illustration of an economic graph showing the market equilibrium. Include a demand curve sloping downwards and a supply curve slooping upwards, intersecting at a point labeled 'Equilibrium'. Highlight this intersection point with an arrow and label 'Equilibrium Price and Quantity'. Use a clean, educational style suitable for an economics textbook, with axes labeled 'Price' on the vertical and 'Quantity' on the horizontal.",
"size": "1024x1024"
}Here’s an illustration of an economic graph showing the market equilibrium, including the demand curve sloping downwards and the supply curve sloping upwards, intersecting at the equilibrium point. This visual should help clarify how equilibrium is represented in economic graphs.
