Economic equilibrium of price and quantity occurs when which condition holds?

• A. The quantity supplied exceeds demand
• B. The price remains fixed
• C. The quantity demanded equals the quantity supplied
• D. The market price is regulated

Answer: (C)

The key idea is that market balance happens when the number of units buyers want to buy matches the number sellers want to sell. When quantity demanded equals quantity supplied, the market clears and there’s no pressure for the price to move—the equilibrium price and quantity. If more people want to buy than there are units available, prices tend to rise, which discourages some demand and encourages more supply; if there is more supply than demand, prices tend to fall, reducing supply and increasing demand. A fixed price prevents this natural adjustment, creating mismatches between buyers and sellers. A regulated price can also misalign with actual preferences and costs, leading to shortages or surpluses rather than true equilibrium.