Registered Environmental Manager (REM) Practice Exam

What is a necessary condition for achieving market equilibrium?

1. Limited information availability

2. Equal willingness among buyers to pay

3. A balance between supply and demand

4. Intervention by economic authorities

The correct answer is: A balance between supply and demand

Achieving market equilibrium is fundamentally about balancing the quantity of a good or service that consumers want to buy (demand) with the quantity that producers want to sell (supply). Market equilibrium occurs at the price at which the amount of the product that consumers are willing to purchase equals the amount that producers are willing to sell. This balance ensures that there are no surpluses (excess supply) or shortages (excess demand) in the market, which is essential for stability and efficiency in economic transactions. When supply equals demand, the market is said to be in equilibrium. The other options touch on various aspects of market dynamics but do not represent necessary conditions for achieving equilibrium. For instance, limited information can lead to market inefficiencies rather than equilibrium. Equal willingness among buyers to pay is not a necessary condition; instead, it is the overall demand at various price levels that influences equilibrium. Lastly, intervention by economic authorities, such as price controls or subsidies, can disrupt natural market forces and potentially prevent market equilibrium rather than help achieve it.