What is the market clearing price?

• A. Equilibrium Price
• B. Disequilibrium
• C. Excess Supply
• D. Excess Demand

Answer: (A)

Market clearing price is the price at which the quantity demanded equals the quantity supplied. At this point the market is balanced, so there is no pressure for the price to move and the market clears. This is the equilibrium price. If the price were above it, there would be excess supply; if it were below it, there would be excess demand, which is disequilibrium.