When the Market Price of a Good Is Below the Equilibrium

question 242

Multiple Choice

When the market price of a good is below the equilibrium price,and all other determinants are unchanged:

• A)the quantity demanded will exceed the quantity supplied.
• B)the supply curve will be to the right of the demand curve.
• C)a surplus will exist in the market.
• D)the government will regulate the price of the good to ensure equilibrium is attaineD.At the equilibrium price,quantity supplied equals quantity demanded.However,as price falls the quantity demanded of a product tends to increase,while the quantity supplied decreases.The result is that quantity demanded will exceed the quantity supplied when the market price is below the equilibrium price,so eventually a shortage will exist.Of course,the presence of a shortage will put upward pressure on prices,so that the market price will move toward the equilibrium price.

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