Question

When the prevailing price is above the price where supply intersects demand: "price falls because there...

  1. When the prevailing price is above the price where supply intersects demand:

    "price falls because there is a shortage, so producers cut prices to try to attract buyers."

    "price rises because there is a surplus, so buyers bid up the price."

    "price falls because there is a surplus, so producers cut prices to try to attract buyers."

    "price rises because of a shortage, so buyers bid up the price."

Homework Answers

Answer #1

When the prevailing price is above the price where supply intersects demand

"price falls because there is a surplus,so producers cut prices to try to attract buyers

(The price where supply intersects demand is called the equilibrium price,where demand = supply,if the prevailing price is above the equilibrium price,it indicates that demand is less than supply,which means that there is a surplus,in such a situation the producers cut their prices,so as to attract buyers to buy their products and increase their sales)

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