A Level Economics AQA Practice Exam

What defines the equilibrium price in a market?

1. The price at which quantity supplied exceeds quantity demanded

2. The price at which quantity demanded meets quantity supplied

3. The highest price consumers are willing to pay

4. The lowest price that producers can charge

The correct answer is: The price at which quantity demanded meets quantity supplied

The equilibrium price in a market is defined as the price at which quantity demanded meets quantity supplied. At this point, the amount of goods that consumers want to purchase equals the amount that producers are willing to sell. This balance ensures that there is no surplus or shortage in the market; producers do not have excess goods that remain unsold, nor do consumers face a scarcity of the goods they want to buy. When the market reaches this equilibrium, both buyers and sellers are satisfied: consumers purchase the quantity they desire at a price they are willing to pay, and producers sell the quantity they are willing to provide at a price that covers their costs. Changes in supply or demand will shift the equilibrium price, but it is always the point at which both sides of the market align perfectly.