ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -False. Suppliers’ desire to eliminate the surplus puts downward pressure on the price. As long as the quantity supplied exceeds the quantity demanded, the surplus forces the price lower.

Detailed explanation-2: -Suppliers’ desire to eliminate a surplus puts upward pressure on the price. If both demand and supply increase, buyers are more willing and able to demand goods at every price, and sellers are more willing and able to sell it at every price.

Detailed explanation-3: -A surplus exists if the quantity of a good or service supplied exceeds the quantity demanded at the current price; it causes downward pressure on price. A shortage exists if the quantity of a good or service demanded exceeds the quantity supplied at the current price; it causes upward pressure on price.

Detailed explanation-4: -If a surplus exist, price must fall in order to entice additional quantity demanded and reduce quantity supplied until the surplus is eliminated. If a shortage exists, price must rise in order to entice additional supply and reduce quantity demanded until the shortage is eliminated.

Detailed explanation-5: -When producers have a surplus of supply, they must sell the product at lower prices. Consequently, more consumers will purchase the product, now that it’s cheaper. This results in supply shortages if producers cannot meet consumer demand.