Equilibrium in a perfectly competitive market can be defined alternatively as:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Zero excess demand and Zero excess supply situation.
A market is in equilibrium when the plans of buyers and sellers match, so the price has no reason to change. At any other price one side is left unsatisfied:
If sellers offer more than buyers want, there is excess supply; unsold stocks push the price down.
If buyers want more than sellers offer, there is excess demand; buyers bid the price up.
The price stops moving only where market demand equals market supply. There neither excess exists, so equilibrium can also be described as a zero excess demand-zero excess supply situation.
Why the other options are incorrect
Option (1) Excess supply and Excess demand. — Incorrect. The two cannot exist together at one price, and either of them means the market is out of equilibrium.
Option (3) Excess Demand and Deficient supply. — Incorrect. Demand greater than supply is a disequilibrium in which the price will rise.
Option (4) Excess Supply and deficient demand. — Incorrect. Supply greater than demand is a disequilibrium in which the price will fall.
NCERT (2025-26): “5.1 Equilibrium, Excess Demand, Excess Supply … If at a price, market supply is greater than market demand, we say that there is an excess supply in the market at that price and if market demand exceeds market supply at a price, it is said that excess demand exists in the market at that price. Therefore, equilibrium in a perfectly competitive market can be defined alternatively as zero excess demand-zero excess supply situation. Whenever market supply is not equal to market demand, and hence the market is not in equilibrium, there will be a tendency for the price to change.…” |