If price is above the equilibrium level, competition among sellers to reduce the resulting:Multiple Choicesurplus will decrease quantity demanded and increase quantity supplied.shortage will increase quantity demanded and decrease quantity supplied.shortage will decrease quantity demanded and increase quantity supplied.surplus will increase quantity demanded and decrease quantity supplied.
Question
If price is above the equilibrium level, competition among sellers to reduce the resulting:Multiple Choicesurplus will decrease quantity demanded and increase quantity supplied.shortage will increase quantity demanded and decrease quantity supplied.shortage will decrease quantity demanded and increase quantity supplied.surplus will increase quantity demanded and decrease quantity supplied.
Solution
The correct answer is: "surplus will increase quantity demanded and decrease quantity supplied."
Here's why:
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If the price is above the equilibrium level, it means that the price is higher than what buyers are willing to pay. This creates a surplus, where the quantity supplied exceeds the quantity demanded.
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In order to get rid of this surplus, sellers will compete with each other to sell their goods. This competition often leads to a decrease in price.
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As the price decreases, more buyers are willing to purchase the goods, which increases the quantity demanded.
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At the same time, the lower price may discourage some sellers from supplying as much of the good, leading to a decrease in the quantity supplied.
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This process continues until the market reaches equilibrium, where quantity demanded equals quantity supplied at a certain price level.
Similar Questions
If the price of a product increases, we would expect:Multiple Choicequantity demanded to increase.supply to decrease.quantity supplied to increase.demand to decrease.
If, for a product, the quantity supplied exceeds the quantity demanded, the market price will fall untilGroup of answer choicesthe quantity demanded exceeds the quantity supplied. The market will then be in equilibrium.quantity demanded equals quantity supplied. The equilibrium price will then be lower than the market price.all consumers will be able to afford the product.quantity demanded equals quantity supplied. The market price will then equal the equilibrium price.
If the price of a product were to go down, what would happen to the quantity demanded of that product?Multiple ChoiceQuantity would increase.Quantity would decrease.Demand would increase.Demand would decrease.Demand and quantity would stay the same.
What will happen as a result of a decrease in supply?Multiple ChoiceEquilibrium price and quantity both rise.Equilibrium price and quantity both fall.Equilibrium price rises and equilibrium quantity falls.Equilibrium price falls and equilibrium quantity rises.
effect on price and quantity when demand decreases and supply increases
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