If the price of a product is above equilibrium, which of the following statements is true?
a |
The quantity supplied will exceed the quantity demanded. |
b |
The quantity demanded will exceed the quantity supplied. |
c |
A shortage of the product exists. |
d |
None of the choices are correct. |
Answer - a. The quantity supplied will exceed the quantity
demanded.
If the price is more than the equilibrium, then the quantity
supplied will be more than the quantity demanded.
The equilibrium price is determined at that point where the
quantity demanded equal to the quantity supplied. When the price is
more than the equilibrium price, there will be surplus. In the
condition of surplus the quantity supplied will be more than the
quantity demanded. The following diagram represents the concept of
surplus or excess supply.
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