A Level Economics AQA Practice Exam

What does the term disequilibrium describe?

1. Equilibrium in a perfectly competitive market

2. Temporary stock shortages

3. Price or quantity not at equilibrium

4. Price stability over time

The correct answer is: Price or quantity not at equilibrium

The term disequilibrium specifically refers to a situation in a market where price or quantity is not at the equilibrium level, meaning that supply and demand are not balanced. In a state of disequilibrium, the market may experience surplus, where supply exceeds demand, or shortage, where demand exceeds supply. This reflects a disturbance in the market dynamics that prevents it from reaching a stable state of equilibrium. In contrast, the other options represent different concepts. The first option pertains to equilibrium, which is the opposite of disequilibrium, indicating a perfectly balanced market. The second option, temporary stock shortages, describes a specific instance of disequilibrium but is not a comprehensive definition of the term itself. Lastly, price stability over time suggests a consistent equilibrium situation where prices do not fluctuate significantly, which also contrasts with the idea of disequilibrium. Thus, the correct understanding of disequilibrium is best captured by the notion of price or quantity not being at equilibrium.