Problem 15 At equilibrium in a market, the ... [FREE SOLUTION]

Chapter 3: Problem 15

At equilibrium in a market, the maximum price that buyers would be willing to pay for the good is equal to the minimum price that sellers need to receive before they are willing to sell the good. Do you agree or disagree with this statement? Explain your answer.

Short Answer

Expert verified

Agree. At equilibrium, the maximum price buyers are willing to pay for the good equals the minimum price sellers need to receive to be willing to sell the good.

Step by step solution

Definition of Equilibrium in Market

The equilibrium in a market occurs when the amount of goods the buyers are willing to buy equals the quantity the sellers are willing to sell. This equates to a situation where the demand of a good equals its supply.

Price determination at Equilibrium

At the point of equilibrium, the price at which goods are sold is the price at which both buyers and sellers are willing to trade. This means that the maximum price a buyer is willing to pay is the same as the minimum price a seller needs to receive as any price above this equilibrium price will decrease the buyer's demand and any price below this will decrease the seller's supply.

Agree or Disagree with the Statement

In light of these explanations, it can be agreed that the statement is correct. At equilibrium, the maximum price buyers are willing to pay equals to the minimum price that sellers will accept for the good. Both parties are satisfied and the market is at a state of balance.