ECONOMICS
MARKETS AND PRICES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The good is discarded
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The good becomes a luxury and price rises
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Either the good remains unsold or the price drops
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Either the good is saved for later sale or the price goes up
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Detailed explanation-1: -It’s a fundamental economic principle that when supply exceeds demand for a good or service, prices fall. When demand exceeds supply, prices tend to rise. There is an inverse relationship between the supply and prices of goods and services when demand is unchanged.
Detailed explanation-2: -A decrease in demand and an increase in supply will cause a fall in equilibrium price, but the effect on equilibrium quantity cannot be determined. 1. For any quantity, consumers now place a lower value on the good, and producers are willing to accept a lower price; therefore, price will fall.
Detailed explanation-3: -Increase in demand > decrease in supply In this case, the right shift of the demand curve is proportionately more than the leftward shift of the supply curve. Hence, both equilibrium quantity and price rise.
Detailed explanation-4: -This condition, where the quantity supplied exceeds the quantity demanded, is called a surplus. The suppliers failing to sell have an incentive to offer their good at a slightly lower price-a penny less-to make a sale. Consequently, when there is a surplus, suppliers push prices down to increase sales.