ECONOMICS
SUPPLY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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if the price of a good is too high
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if the price of a good is too low
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if the price is set at the equilibrium price
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None of the above
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Detailed explanation-1: -It is most likely yes. 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: -If the price decreases, quantity demanded increases. This is the Law of Demand. On a graph, an inverse relationship is represented by a downward sloping line from left to right.
Detailed explanation-3: -Answer and Explanation: The correct answer is price ceiling. A price ceiling set below the market equilibrium price causes a shortage. At a price below the market equilibrium price, quantity demanded will exceed quantity supplied.
Detailed explanation-4: -Price ceilings only become a problem when they are set below the market equilibrium price. When the ceiling is set below the market price, there will be excess demand or a supply shortage. Producers won’t produce as much at the lower price, while consumers will demand more because the goods are cheaper.
Detailed explanation-5: -A shortage is a condition where the quantity demanded is greater than the quantity supplied at the market price. There are three main causes of shortage-increase in demand, decrease in supply, and government intervention.