Price determination and price mechanism

What is equilibrium price and quantity and how are they determined?

• Equilibrium price and quantity are determined at the point where the supply and demand curves intersect, indicating the price at which the quantity supplied equals the quantity demanded.

• Equilibrium price and quantity are determined by the government setting a fixed price for goods and services.

• Equilibrium price and quantity are determined when only the supply curve is considered, regardless of demand.

• Equilibrium price and quantity are determined by the highest price consumers are willing to pay, regardless of supply.

What do supply and demand diagrams depict when there is excess supply and excess demand?

• Supply and demand diagrams depict the presence of excess supply when the quantity supplied exceeds the quantity demanded, and excess demand when the quantity demanded exceeds the quantity supplied.

• Supply and demand diagrams depict equilibrium when the quantity supplied is always less than the quantity demanded.

• Supply and demand diagrams depict only the price changes, not the relationship between supply and demand.

• Supply and demand diagrams depict excess supply when the quantity demanded exceeds the quantity supplied, and excess demand when the quantity supplied exceeds the quantity demanded.

How do market forces operate to eliminate excess demand and excess supply?

• Market forces operate to eliminate excess demand by increasing prices, which reduces demand and increases supply, and to eliminate excess supply by decreasing prices, which increases demand and reduces supply.

• Market forces operate to eliminate excess demand by decreasing prices, which increases demand and reduces supply, and to eliminate excess supply by increasing prices, which reduces demand and increases supply.

• Market forces operate to eliminate excess demand by increasing supply only, and to eliminate excess supply by decreasing demand only.

• Market forces operate to eliminate excess demand and excess supply by keeping prices constant regardless of market conditions.

How do shifts in demand and supply curves cause the equilibrium price and quantity to change in real-world situations?

• Shifts in demand and supply curves cause the equilibrium price and quantity to change by creating new intersection points, reflecting changes in market conditions.

• Shifts in demand and supply curves have no effect on equilibrium price and quantity.

• Shifts in demand and supply curves only affect the quantity, not the price.

• Shifts in demand and supply curves always lead to a decrease in both equilibrium price and quantity, regardless of the direction of the shift.

What are the functions of the price mechanism to allocate resources?

• The functions of the price mechanism to allocate resources are rationing, incentive, and signalling.

• The functions of the price mechanism to allocate resources are production, consumption, and distribution.

• The functions of the price mechanism to allocate resources are saving, investment, and taxation.

• The functions of the price mechanism to allocate resources are employment, inflation, and deflation.

Describe the price mechanism in the context of different types of markets, including local, national, and global markets.

• The price mechanism operates in local, national, and global markets to allocate resources efficiently by responding to changes in supply and demand, influencing prices and quantities traded.

• The price mechanism only functions in local markets and is not influenced by supply and demand in national or global markets.

• The price mechanism in global markets ignores changes in supply and demand, leading to fixed prices everywhere.

• The price mechanism is used solely to set government-mandated prices, regardless of market conditions.