Examine this supply and demand graph for a product. What does the red dot
on the graph represent?
Demand
$5
Supply
$4
Price
$3
$2
$1
0
2
4
5
Quantity
O A. The product's equilibrium price
O B. The product's quantity demanded
O C. The product's quantity supplied
O D. The product's supply schedule

The product’s equilibrium price

Just simply because the price and quantity is the same

The red dot on the graph represents the product's equilibrium price.

Demand refers to the consumer's desire and ability in order to purchase a good or service at a given period of time. There is an inverse relationship between demand and price. When price of a product increases, the demand decreases and vice versa.

Supply refers to the total amount of a given product or service a supplier offers to consumers at a given period of time. Supply is usually determined by market movement.

The supply and demand graph indicates the relationship between quantity supplied and the quantity demanded. In the graph it is seen that the demand curve and supply curve meet a point, which is the point of intersection (the red dot) and also the point of equilibrium.

Equilibrium is a state of rest. At equilibrium demand matches supply at the same price. If a market is at its equilibrium price and quantity, then it has no reason to move away from that point, as it's balancing both, quantity supplied and the quantity demanded.

However, in the graph the equilibrium price represents the point where the supply of a product is equal to the demand for that product. Thus, red dot on the graph represents the product's equilibrium price where supply meets demand.

Hence, option A is correct.

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