Question

Which of the following statements is/are correct for the Market Equilibrium in the model of Supply and Demand?

Answer 1

The given question is incomplete as the group of choices are not given, required to answer the question. However, the group of choices for this question is as follows:

1) stable – if we are there we will stay there, unless outside forces change

2)  unique – there is one and only one equilibrium, a property which follows from the “Law of Demand” and “Law of Supply”

3)  self-enforcing – at higher prices there is downward pressure on price; at lower prices there is upward pressure on price – therefore if we are at some other price, we will be pushed toward the equilibrium price

4)  All of the above statements are correct

Answer:

The correct answer is - option 4. all of the above statements are correct.

Explanation:

According to the model of the demand and supply, market equilibrium in the model of the supply and demand is the market where the balance between supply and demand is equal and due to equal demand and supply prices of a particular product is stable.

If there is an over-supply of products than the demand in the market the prices will go down, which results in higher demand. At higher prices there is pressure on the price to move downward; at lower prices, the pressure would be upward.

Thus, the correct answer is - option 4. all of the statements are correct