Question

Write a one-paragraph response.

If the price of a product is currently above the equilibrium price, discuss what would happen in the market. In your discussion, explain what happens to price, to quantity supplied, and to quantity demanded, as the market adjusts toward equilibrium.

Answer 1

If the price of the product is above the market price then at that point quantity supplied is more than the quantity demanded in the market. that will lead to a surplus.

A surplus will mean lot of unused goods and lack of demand at that price. it will cause a downward pressure in the market. Pushing the price down. This downward pressure and decrease in the supply and an increase in the demand will continue to the point where the demand and supply are equal and the market is back in the equilibrium. At this point the supply will be less and the demand will be more.Eliminating the surplus in the market.