Market Clearing
Market clearing refers to the condition in which supply equals demand in a market, meaning all goods or securities offered for sale are purchased at the equilibrium price.In a market-clearing situation, there are no surpluses or shortages, and the price adjusts to ensure that the quantity supplied matches the quantity demanded. In financial markets, market-clearing prices ensure that buyers and sellers transact efficiently.
Example
In the housing market, the market-clearing price is the price at which the number of homes available for sale equals the number of buyers willing to purchase homes.
Key points
• The condition where supply equals demand, and all goods or securities offered for sale are bought.
• The market-clearing price is the equilibrium price at which no surpluses or shortages exist.
• Ensures efficient transactions in financial markets.
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