What happens in case of market equilibrium:
(a) Market demand = market supply
(b) There is no excess supply in the market
Show answer & explanation
Correct answer: C
Explanation
The correct answer is option 3 i.e. Both (a) and (b).
Both (a) and (b) are correct: when a market is in equilibrium, market demand equals market supply and there is no excess supply in the market:
- Market demand equals market supply
- When a market is in equilibrium, the quantity demanded is equal to the quantity supplied at the market price. This is the ideal market price, and the price and supply will generally remain stable unless an external factor affects demand or supply.
- No excess supply
- When a market is in equilibrium, there is no excess supply or excess demand. This means that everyone is equally satisfied, or no one is experiencing a shortage.
When the market price is above equilibrium, there is an excess supply, or surplus, in the market. When the market price is below equilibrium, there is an excess demand, or supply shortage.