Question

the equilibrium price ________.

a. means a product shortage exists
b. occurs when supply equals demand for a good or service
c. is dictated by consumers
d. results in higher demand for goods and services
e. only affects goods but not services

Explanation:

To determine the correct answer, we analyze each option:

• Option A: A product shortage exists when demand exceeds supply, not at equilibrium. So A is incorrect.
• Option B: The equilibrium price is defined as the price at which the quantity supplied equals the quantity demanded for a good or service. This matches the economic definition of equilibrium price.
• Option C: Equilibrium price is determined by the interaction of supply and demand, not just by consumers. So C is incorrect.
• Option D: Equilibrium price is the price where supply and demand are balanced; it doesn't inherently result in higher demand. Demand is influenced by various factors like income, preferences, etc., not just equilibrium price. So D is incorrect.
• Option E: Equilibrium price applies to both goods and services. So E is incorrect.

Answer:

B. occurs when supply equals demand for a good or service