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Question

What is the law of demand and supply all about and how does it affect the principle of equilibrium?

Answer

The law of demand and supply states that the quantity of a product demanded and the quantity supplied in a market are inversely related to its price, ceteris paribus. The principle of equilibrium states that in a market, the price will adjust until the quantity demanded is equal to the quantity supplied. The law of demand and supply affects the principle of equilibrium by influencing the price at which the quantity demanded and quantity supplied are equal. When there is excess demand or shortage, the price will increase, and when there is excess supply, the price will decrease. The market will reach equilibrium when the price reaches a point where the quantity supplied equals the quantity demanded.

  • Q: What is the law of demand and supply? A: The law of demand and supply states that the quantity of a product demanded and the quantity supplied in a market are inversely related to its price, ceteris paribus.
  • Q: What is the principle of equilibrium? A: The principle of equilibrium states that in a market, the price will adjust until the quantity demanded is equal to the quantity supplied.
  • Q: How does the law of demand and supply affect the principle of equilibrium? A: The law of demand and supply affects the principle of equilibrium by influencing the price at which the quantity demanded and quantity supplied are equal. When there is excess demand or shortage, the price will increase, and when there is excess supply, the price will decrease. The market will reach equilibrium when the price reaches a point where the quantity supplied equals the quantity demanded.