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What is the equilibrium point? How is it achieved? Why are prices above or below the...

What is the equilibrium point? How is it achieved? Why are prices above or below the equilibrium point unjust?

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Answer #1

Equilibrium is the point where demand equals supply. This point determines equilibrium quantity and price.

It is achieved by the interaction of buyers and sellers. Buyers decrease their demand with an increase in price while sellers increase supply. Change in price brings a point where buyers and sellers want to buy and sell at a common price and thus equilibrium point is achieved.

Prices above and below are unjust because they create a shortage when demand is more than supply at low prices and surplus when demand is less than supply at high prices.

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