Future Business Leaders of America (FBLA) Business Management Practice Test

What is the name for the price at which supply equals demand?

1. Equilibrium price

2. Market price

3. Value price

4. Coincident index

The correct answer is: Equilibrium price

The equilibrium price refers to the specific price point in a market where the quantity of goods supplied is equal to the quantity of goods demanded. This balance ensures that there is neither a surplus nor a shortage in the market, allowing transactions to occur smoothly. At this price, consumers are willing to purchase exactly as much of the product as producers are willing to sell. Understanding the equilibrium price is crucial for businesses, as it informs pricing strategies, production levels, and inventory management. It reflects the overall health of a market and provides insights into consumer behavior and production costs. After a disturbance, such as a shift in demand or supply, the market tends to move towards this equilibrium point, adapting to the changes. Other options present related but different concepts. The market price generally refers to the current price offered for a good or service in the market, which fluctuates based on various factors. Value price can describe the perceived worth of an item to consumers but doesn't specifically relate to the balance between supply and demand. A coincident index measures economic activity and can indicate the current state of the economy but does not pertain directly to the supply-demand relationship in pricing.