Final answer:
In a free market system, 'demand' is the correct answer and refers to the amount of goods consumers are willing to buy at different prices.
Supply is the amount offered for sale, and equilibrium is achieved when the quantity supplied equals the quantity demanded with no surplus or shortage.
Step-by-step explanation:
In a free market system, "demand" refers to the quantity of products that consumers are willing to buy at different market prices.
The demand of a product is a key concept in economics and embodies the amount of goods or services that consumers are prepared to purchase at various prices.
This relationship between price and the quantity demanded is what we call the demand relationship. It contrasts with "supply," which is the total amount of goods and services that are available for sale at various prices.
When the market reaches a point where the amount of goods supplied equals the amount consumers are willing to buy, we have what is known as "equilibrium".
If the market price is too high, a surplus will occur, leading to unsold goods. Conversely, prices set too low result in a shortage, as the quantity demanded exceeds the quantity supplied. Over time, market forces usually drive the price toward the equilibrium price, where neither surplus nor shortage exists.
Understanding the difference between demand, supply, and equilibrium is vital for analyzing market dynamics and predicting how changes like a price ceiling will impact economic transactions.