Market Disequilibrium Drives Price Adjustments

Steps:

• Define disequilibrium: A state where quantity supplied does not equal quantity demanded at the current price.
• Identify imbalance: Excess supply (surplus) or excess demand (shortage) occurs.
• Apply market forces: Prices rise with shortages or fall with surpluses to restore balance.
• Conclude outcome: Adjustment continues until equilibrium is reached.

Why A is correct:

• In disequilibrium, the law of supply and demand dictates that prices change to equate supply and demand, eliminating imbalances.

Why the others are wrong:

• B: Disequilibrium specifically means supply does not equal demand.
• C: Markets self-correct through price changes; government intervention is optional, not required.
• D: Disequilibrium can cause surpluses or shortages, but shortages are not guaranteed.

Final answer: A