• Card 64 / 100: Why is it called an "equilibrium" price when quantity demanded equals quantity supplied?

    Answer:
    If the price were higher than the equilibrium price, there would be a surplus and producers would lower prices to move the unsold stock. If the price were lower than the equilibrium price, there would be a shortage and consumers would bid up the price on the available stock. Only at the equilibrium price is there no incentive for the price to move away, hence it is a stable position for the price. Sample Partial Credit Answer It is a stable point.

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Capitalism: The Market Economy

Access: Public Peer Review

Attribution:  Dr. Robert P. Murphy, Lessons for the Young Economist. (Mises Institute), http://mises.org/document/6215/Lessons-for-the-Young-Economist (Accessed 04 April, 2014). License: Creative Commons BY
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