Question

Clara visits the local bakery shop several times a week and knows the​ owner, Sam, very well. Her favorite​ cupcakes, chocolate​ cream, sell for ​$2 each. She buys them regularly. The ​$2 charged per cupcake is the _____.

Answer 1

Equilibrium price

Step-by-step explanation:

Equilibrium price is the point at which the quantity a consumer is willing to buy is equal to the quantity a supplier is willing to sell at a particular price.

So in this case Clara is happy to buy the cup cakes at $2 and does so regularly. Sam is also willing to sell at $2.

This is exemplified in the attached diagram (P1).

If however Sam decides to increase the price above equilibrium, Sarah might go elsewhere to buy at a price she wants.