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CSEET · Economic and Business Environment · Basics of Demand and Supply and Forms of Market Competition

In a competitive market, the price at which the quantity demanded by buyers exactly equals the quantity supplied by sellers is called the:

The price at which quantity demanded equals quantity supplied is the equilibrium price. At this price the market clears, with no shortage or surplus, so buyers and sellers have no pressure to change the price. A ceiling is only a legal limit and need not clear the market.

  1. AEquilibrium priceCorrect
  2. BPrice ceiling
  3. CReservation price
  4. DAdministered price

Explanation

Market equilibrium occurs where the demand and supply curves intersect. At that price there is neither excess demand nor excess supply, so the market clears. A price ceiling is a legal maximum and does not by itself equate the two quantities.

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