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Chapter 4: Q. 17 (page 104)

How do economists define equilibrium in financial markets?

Short Answer

Expert verified

Equilibrium is the state in which market supply and demand are balanced, resulting in steady prices.

Step by step solution

01

Definition

Market equilibrium:

When the supply and demand curves are combined, there is a point where they intersect, which is known as market equilibrium. There is no shortage or excess at the equilibrium price because the quantity of the good that buyers are willing to buy equals the quantity that sellers are willing to sell.

02

Explanation

The state of equilibrium is when market supply and demand are matched, resulting in stable prices. In general, when there is an overabundance of goods or services, prices fall, resulting in higher demand, and when there is a shortage or undersupply, prices rise, resulting in reduced demand.

03

Conclusion

Therefore, the quantity of loanable money required equals the quantity supplied in equilibrium.

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Most popular questions from this chapter

29. Predict how each of the following events will raise or lower the equilibrium wage and quantity of oil workers in Texas. In each case, sketch a demand and supply diagram to illustrate your answer.

a. The price of oil rises.

b. New oil-drilling equipment is invented that is cheap and requires few workers to run.

c. Several major companies that do not drill oil open factories in Texas, offering many well-paid jobs outside the oil industry.

d. Government imposes costly new regulations to make oil drilling a safer job.

In the financial market, what causes a movement along the demand curve? What causes a shift in the demand curve?

If a usury law limits interest rates to no more than 35%, what would the likely impact be on the amount of loans made and interest rates paid

Name some factors that can cause a shift in the supply curve in labor markets.

What is the “price” commonly called in the labor market?
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