Market equilibrium occurs at the price where

• A. Quantity demanded > quantity supplied
• B. Quantity demanded equals quantity supplied
• C. Price is at any level
• D. Quantity demanded < quantity supplied

Answer: (B)

Market equilibrium occurs where the quantity demanded equals the quantity supplied. This is the price that clears the market, so there’s no inherent pressure for the price to move up or down because the desires of buyers and the plans of sellers match perfectly for that level. When demand exceeds supply, a shortage appears and prices tend to rise toward equilibrium; when supply exceeds demand, a surplus appears and prices tend to fall toward equilibrium. Therefore, the scenario where quantity demanded equals quantity supplied is the one that best describes a market-clearing price.