If a market for good X is in disequilibrium, which of the following statements is...
If a market for good X is in disequilibrium, which of the following statements is true about the quantity of X that is actually exchanged?
- A) it is determined by the forces of demand
- B) it is determined by the forces of supply
- C) it is determined by both demand and supply forces
- D) it is determined by the forces of demand or supply, whichever is shorter
Correct Answer: C) it is determined by both demand and supply forces
Explanation
The question is asking what happens to the quantity of good X that is actually exchanged when the market for good X is in disequilibrium. Disequilibrium means that the demand and supply forces in the market are not balanced, which can result in either a shortage or a surplus of the good.
Option A suggests that the quantity of good X that is actually exchanged is solely determined by the forces of demand. However, this is not necessarily true as the supply side also plays a role in determining the quantity of good X that is actually exchanged.
Option B suggests that the quantity of good X that is actually exchanged is solely determined by the forces of supply. However, this is also not necessarily true as the demand side also plays a role in determining the quantity of good X that is actually exchanged.
Option C, which is the correct answer, suggests that the quantity of good X that is actually exchanged is determined by both the demand and supply forces. When the market for good X is in disequilibrium, the quantity of good X that is actually exchanged will be determined by the side with the stronger force, which can either be demand or supply.
Option D suggests that the quantity of good X that is actually exchanged is determined by the forces of demand or supply, whichever is shorter. This option is not correct as the quantity of good X that is actually exchanged is not determined by the shorter side but rather by the side with the stronger force.
In summary, when the market for good X is in disequilibrium, the quantity of good X that is actually exchanged is determined by both demand and supply forces, with the side having the stronger force determining the quantity of good X that is actually exchanged.