Why is the competitive equilibrium price often referred to as the market clearing price?
What will be an ideal response?
The competitive equilibrium price is determined at the point of intersection of the market demand and the market supply curve. At the point of intersection, the quantity demanded is equal to the quantity supplied in the market, which implies that there is no excess supply or excess demand in the market. Because quantity demanded equals quantity supplied and markets clear at the competitive equilibrium price, the price is also referred to as the market clearing price.
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A linear demand for lake front cabins on a nearby lake is estimated to be: QD = 900,000 - 2P. What is the point price elasticity for lake front cabins at a price of P = $300,000? [HINT: Ep = (?Q/?P)(P/Q)]
a. EP = -3.0 b. EP = -2.0 c. EP = -1.0 d. EP = -0.5 e. EP = 0
"Countries are poor because they cannot afford to save and invest" is called the:
A. vicious circle of poverty. B. savings-investment trap. C. LDC trap. D. cycle of insufficient credit.