Question

Answer the following questions with short paragraphs. Use economic reasoning to defend it. Make sure to answer all parts!

What do the demand and supply curves represent? Why do economists view equilibrium as the most efficient production level?

Answer 1

Demand curve in the market represents the amount of goods people are willing to buy at a given price and the supply curve in the market represents the amount of goods the producer is willing to supply at the given price level. Equilibrium level of considered as most efficient level because at that point the demand and supply in the market are equal, i.e. the amount of goods produced are willingly taken by the consumers, if the price will be high then there will be more supply and less demand that will lead to surplus of goods, if the price is less there will be more demand and less supply that will lead to shortage, both this demand and supply mismatch situation represents ineffiency in the market.