Question

The situation where market supply equals market demand is called

• A. Excess demand
• B. Excess supply
• C. Deficient demand
• D. Market equilibrium

Hint:

In economics, market equilibrium is achieved when the quantity supplied equals the quantity demanded at a given price, ensuring there is no pressure for the price to change.

Answer 1

The Correct Option is D

Step 1: Understanding market equilibrium.
Market equilibrium occurs when the quantity of goods supplied equals the quantity of goods demanded at a particular price. At this point, there is no tendency for the price to change unless an external factor affects supply or demand.
Step 2: Evaluation of options.

• (A) Excess demand: Incorrect. Excess demand occurs when demand exceeds supply, leading to upward pressure on prices.
• (B) Excess supply: Incorrect. Excess supply happens when supply exceeds demand, leading to downward pressure on prices.
• (C) Deficient demand: Incorrect. This term is not used to describe market conditions at equilibrium.
• (D) Market equilibrium: Correct. This is the situation where market supply equals market demand.

Step 3: Conclusion.
Thus, when market supply equals market demand, the situation is called market equilibrium. Final Answer: Market equilibrium.