Which term refers to the price at which the market clears, with no inherent pressure for price to rise or fall?

• A. Excess demand
• B. Demand curve
• C. Equilibrium price
• D. Substitute goods

Answer: (C)

Equilibrium price is the price at which the market clears, with quantity supplied equal to quantity demanded, so there’s no inherent pressure for the price to move. When the market is balanced like this, buyers and sellers are satisfied and the price tends to stay put. If the price rose above this level, a surplus would occur—more goods would be supplied than demanded—pushing the price back down. If the price fell below it, a shortage would occur—demand would exceed supply—pushing the price back up. The demand curve shows how much buyers want at different prices, not the clearing price itself, while excess demand describes a shortage situation and substitute goods are other products that can replace the one in question, affecting demand rather than the market-clearing price.