ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -At a price above equilibrium, like 1.8 dollars, quantity supplied exceeds the quantity demanded, so there is excess supply. At a price below equilibrium, such as 1.2 dollars, quantity demanded exceeds quantity supplied, so there is excess demand.

Detailed explanation-2: -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-3: -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.

Detailed explanation-4: -Solution. When equilibrium price of a good is more than its market price, then there will be competition among the buyers. This is because when the equilibrium price of a good is above the market price then it implies that there is a situation of excess demand.

Detailed explanation-5: -Key Takeaways The quantity supplied of a good or service exceeding the quantity demanded is called a surplus. If the quantity demanded exceeds the quantity supplied, a shortage exists. The equilibrium price is the price in which the quantity supplied equals the quantity demanded.