ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Shortages. Just as a price above the equilibrium price will cause a surplus, a price below equilibrium will cause a shortage. A shortage is the amount by which the quantity demanded exceeds the quantity supplied at the current price.

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: -If the price is below the equilibrium level, then the quantity demanded will exceed the quantity supplied. Excess demand or a shortage will exist. If the price is above the equilibrium level, then the quantity supplied will exceed the quantity demanded. Excess supply or a surplus will exist.

Detailed explanation-4: -A surplus exists when the price is above equilibrium, which encourages sellers to lower their prices to eliminate the surplus. A shortage will exist at any price below equilibrium, which leads to the price of the good increasing.

Detailed explanation-5: -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.