Given a market equilibrium point, explain, using the concepts of demand and supply, how it is achieved
What will be an ideal response?
Market equilibrium occurs at the point at which the demand curve intersects the supply curve. The quantities demanded and supplied are equal at this point, and the price at this point is the market clearing price. If the price of the item happened to be below the market clearing price, quantity demanded would exceed quantity supplied, and there would be a shortage of the item. Consumers would offer to pay a higher price to obtain the item. The higher price would induce an increase quantity supplied and a decrease in quantity demanded. Eventually, quantity supplied would equal quantity demanded at the higher, market clearing price. Conversely, if the price of the item happened to be above the market clearing price, quantity supplied would exceed quantity demanded, and there would be a surplus of the item. Producers would offer to sell the item at a lower price. The lower price would induce an increase in quantity demanded and a decrease in quantity supplied. Eventually, quantity demanded would equal quantity supplied at the lower, market clearing price.
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Compared to a perfectly competitive market, a single-price monopoly sets
A) a lower price. B) the same price. C) a higher price. D) a price that might be higher, lower, or the same depending on whether the monopoly's marginal revenue curve lies above, below, or on its demand curve. E) a price that might be higher, lower, or the same depending on whether the monopoly's marginal cost curve lies above, below, or on its marginal revenue curve.
What differentiates a savings deposit from a small-denomination certificate of deposit (CD)?
A) A CD has a fixed maturity date; a savings deposit can be withdrawn at any time. B) A savings deposit cannot be withdrawn before its maturity date without incurring a penalty; funds in a CD are available at any time with no interest penalty. C) Only a savings deposit is a time deposit. D) All depository institutions accept savings deposits, whereas only a thrift institution can issue a CD.