Are Markets Always in Equilibrium

question 59

Multiple Choice

Are markets always in equilibrium?

• A)Yes, they are always at the equilibrium point, or very close to it.
• B)Yes, because few things tend to alter supply and demand.
• C)No, but if there is no interference, they tend to move toward equilibrium.
• D)No, they never "settle down" into a stable price and quantity.
• E)Uncertain, economic theory has no answer to this question.

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Definitions:

Theoretical Value

The estimated price of an asset or financial instrument based on mathematical models instead of market prices, often used in options pricing.

Binomial Option Price

A mathematical model that is used to calculate the theoretical price of options using a binomial tree of possible price movements.

Black Scholes Price

A theoretical price model for European-style options that estimates the option's price given certain fixed financial variables.

Subintervals

Divisions of a larger interval into smaller ones, often used in mathematical analysis and computations.