ECONOMICS
PRICE CEILINGS AND FLOORS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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surplus
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shortage
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equilibrium
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correction
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Detailed explanation-1: -Excess Demand: the quantity demanded is greater than the quantity supplied at the given price. This is also called a shortage. Excess Supply: the quantity demanded is less than the quantity supplied at the given price. This is also called a surplus.
Detailed explanation-2: -Surplus and shortage: If the market price is above the equilibrium price, quantity supplied is greater than quantity demanded, creating a surplus. Market price will fall.
Detailed explanation-3: -The equilibrium occurs where the quantity demanded is equal to the quantity supplied. If the price is below the equilibrium level, then the quantity demanded will exceed the quantity supplied. Excess demand or a shortage will exist.
Detailed explanation-4: -A surplus results from a disconnect between supply and demand for a product, or when some people are willing to pay more for a product than other consumers. Typically, a surplus causes a market disequilibrium in the supply and demand of a product.