When price is below the equilibrium level in a competitive market, the price will be driven upward due toSelected answer will be automatically saved. For keyboard navigation, press up/down arrow keys to select an answer.aexcess supply.bgovernment intervention.ccompetition among suppliers.dexcess demand.etechnical inefficiency.
Question
When price is below the equilibrium level in a competitive market, the price will be driven upward due toSelected answer will be automatically saved. For keyboard navigation, press up/down arrow keys to select an answer.aexcess supply.bgovernment intervention.ccompetition among suppliers.dexcess demand.etechnical inefficiency.
Solution
The answer is d. Excess demand.
Here's the step by step explanation:
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In a competitive market, the price of a product is determined by the forces of supply and demand.
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When the price is below the equilibrium level, it means that the price is so low that consumers demand more of the product than suppliers are willing to supply. This creates a situation of excess demand.
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In response to this excess demand, suppliers will raise their prices in order to balance out the demand with their supply.
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As prices rise, some consumers will be deterred from buying the product, reducing the demand.
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This process continues until the quantity demanded equals the quantity supplied, which is the point of equilibrium.
So, when price is below the equilibrium level in a competitive market, the price will be driven upward due to excess demand.
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