Market equilibrium occurs when which condition holds?

Market equilibrium occurs when which condition holds?

• A. Market supply equals market demand
• B. Price equals marginal cost
• C. Demand exceeds supply
• D. Supply exceeds demand

Answer: (A)

Market equilibrium is the point at which the quantity buyers want to purchase matches the quantity sellers are willing to offer. In other words, the market clears: supply equals demand at the prevailing price, so there’s no inherent pressure for the price to move, assuming other factors remain constant. That’s why the correct condition is that market supply equals market demand. Price equaling marginal cost is a statement about efficiency under certain competitive conditions, not the definition of equilibrium itself. Shortages occur when demand exceeds supply, and surpluses occur when supply exceeds demand, both signaling that the market is not in balance.

Market equilibrium is the point at which the quantity buyers want to purchase matches the quantity sellers are willing to offer. In other words, the market clears: supply equals demand at the prevailing price, so there’s no inherent pressure for the price to move, assuming other factors remain constant. That’s why the correct condition is that market supply equals market demand.

Price equaling marginal cost is a statement about efficiency under certain competitive conditions, not the definition of equilibrium itself. Shortages occur when demand exceeds supply, and surpluses occur when supply exceeds demand, both signaling that the market is not in balance.