Future Business Leader Achievments (FBLA) Economics Practice Exam

What condition exists when there is no pressure for prices to change?

1. Quantity supplied exceeds quantity demanded

2. Price remains unchanged over time

3. Quantity demanded equals quantity supplied

4. All products are sold out

The correct answer is: Quantity demanded equals quantity supplied

When there is no pressure for prices to change, it indicates a state of market equilibrium, where quantity demanded equals quantity supplied. In this situation, the amount of a good or service that consumers are willing to buy matches perfectly with the amount that producers are willing to sell. Therefore, there is no surplus or shortage that would typically prompt changes in price. This balance means that market forces do not push prices up or down; instead, the existing price remains stable because there is no incentive for either buyers or sellers to alter their behavior. A situation where quantity supplied exceeds quantity demanded would create an excess supply, leading to downward pressure on prices. Conversely, if quantity demanded exceeds quantity supplied, there would be upward pressure on prices as consumers compete to purchase the limited available quantity. The condition of all products being sold out implies a scarcity, which again would influence prices to rise. In summary, equilibrium serves as the pivotal point where market dynamics balance out, leading to the stability of prices.