When disequilibrium between supply and demand has tendencies to be restored to another equilibrium point...
When disequilibrium between supply and demand has tendencies to be restored to another equilibrium point over a definite path of a time frame, the equilibrium is regarded as;
- A) Dynamic and convergence equilibrium
- B) Static and Convergence equilibrium
- C) Static and Divergence equilibrium
- D) Dynamic and Divergence equilibrium
Correct Answer: A) Dynamic and convergence equilibrium
Explanation
The question is asking about equilibrium between supply and demand. Equilibrium is a state where the quantity of goods supplied matches the quantity of goods demanded. Disequilibrium occurs when this balance is upset, i.e. when demand or supply is greater than the other. The question is asking about what happens when disequilibrium occurs and the market moves towards a new equilibrium point.
The options are: Dynamic and convergence equilibrium, Static and Convergence equilibrium, Static and Divergence equilibrium, and Dynamic and Divergence equilibrium. The correct answer is Option A: Dynamic and convergence equilibrium. This means that the market is in a state of flux and is moving towards a new equilibrium point over time.
Dynamic equilibrium is a state where the market is constantly changing and adjusting to new conditions. Convergence equilibrium refers to the market moving towards a new equilibrium point. This may happen when there is a change in supply or demand or when there is an external shock to the market. The market will adjust over time until a new equilibrium point is reached.
Static equilibrium, on the other hand, is a state where the market is stable and there is no change in supply or demand. Divergence equilibrium occurs when the market moves away from an equilibrium point, and the market is not moving towards a new equilibrium point.
In summary, the correct answer is Option A: Dynamic and convergence equilibrium, which means that the market is adjusting towards a new equilibrium point over time.