ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Once you lower the price of your product, your product’s quantity demanded will rise until equilibrium is reached. Therefore, surplus drives price down. If the market price is below the equilibrium price, quantity supplied is less than quantity demanded, creating a shortage.

Detailed explanation-2: -In order to stay competitive many firms will lower their prices thus lowering the market price for the product. In response to the lower price, consumers will increase their quantity demanded, moving the market toward an equilibrium price and quantity.

Detailed explanation-3: -A decrease in demand will cause the equilibrium price to fall; quantity supplied will decrease. An increase in supply, all other things unchanged, will cause the equilibrium price to fall; quantity demanded will increase.

Detailed explanation-4: -Consumer surplus always increases as the price of a good falls and decreases as the price of a good rises. It is depicted visually by economists as the triangular area under the demand curve between the market price and what consumers would be willing to pay.

Detailed explanation-5: -As the equilibrium price decreases, producer surplus decreases. Shifts in the demand curve are directly related to producer surplus. If demand increases, producer surplus increases.