ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Yes, you are correct. This is because when there is a surplus, producers have to sell their excess supply (surplus) at a lower price in order for consumers to actually be willing and able to demand for it.

Detailed explanation-2: -If the price is below the equilibrium level, then the quantity demanded will exceed the quantity supplied. Excess demand or a shortage will exist. If the price is above the equilibrium level, then the quantity supplied will exceed the quantity demanded. Excess supply or a surplus will exist.

Detailed explanation-3: -A price below equilibrium creates a shortage. Quantity supplied (550) is less than quantity demanded (700). Or, to put it in words, the amount that producers want to sell is less than the amount that consumers want to buy. We call this a situation of excess demand (since Qd > Qs) or a shortage.

Detailed explanation-4: -When price prevailing in the market is higher than the equilibrium price, demand will be less than supply, i.e. there is excess supply in the market. Excess supply will force the market price to slide down causing expansion of demand and contraction of supply.

Detailed explanation-5: -A shortage will exist at any price below equilibrium, which leads to the price of the good increasing.