AP Microeconomics: Market Equilibrium Quiz

Market equilibrium occurs at the intersection of supply and demand. In AP economics market forces push the price to a point where the cost of production equals the willingness of buyers to pay for it. In equilibrium, the market clears and there's no incentive for producers to enter the market or consumers to exit. If the price of a good is above the equilibrium then demanders will increase the quantity demanded and suppliers will decrease the quantity supplied to meet at an equilibrium point. The converse is true as well. Government intervention into markets by using floors and ceilings result in shortages and surpluses with distributional effects unintended by the intervention.