Future Business Leaders of America (FBLA) Agribusiness Practice Test

What is the term for the price and quantity at which supply and demand intersect?

1. Equilibrium Price and Quantity

2. Diminishing Marginal Utility

3. Free Enterprise

4. Economic Opportunities

The correct answer is: Equilibrium Price and Quantity

The term that describes the price and quantity at which supply and demand intersect is known as the Equilibrium Price and Quantity. This point is significant in economics because it represents a state where the amount of a good or service that consumers are willing to purchase (demand) is equal to the amount that producers are willing to sell (supply). At this stage, there is no tendency for the price to change, as the market is in balance. In this context, understanding the concept of equilibrium helps businesses make decisions about pricing strategies and production levels. When the market is at equilibrium, it reflects optimal resource allocation, where consumer preferences align with producer supply levels. This concept is foundational in both agribusiness and broader economic studies, as it influences how products are marketed and sold. The other terms listed do not specifically refer to this intersection point. For example, diminishing marginal utility pertains to consumer behavior regarding the satisfaction gained from consuming additional units of a good, while free enterprise relates to an economic system that allows individuals to operate businesses with minimal government interference. Economic opportunities refer to the conditions that allow for profitable business ventures and do not specifically address the equilibrium of supply and demand.