GK
BUSINESS ECONOMICS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Price = $700, demand = 300, supply = 500
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Price = $500, demand = 500, supply = 300
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Price = $600, demand = 400, supply = 400
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Price = $400, demand = 600, supply = 200
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Detailed explanation-1: -Excess supply in a perfectly competitive market is the “extra” amount of supply, beyond the quantity demanded. As an example, suppose the price of a television is $600, the quantity supplied at that price is 1000 televisions, and the quantity demanded is 300 televisions.
Detailed explanation-2: -Excess demand occurs when the price is lower than the equilibrium price. Say, the price of the product is 2. The quantity demanded will be equal to 19 (20 – 0.5*2), while the quantity supplied is 14 (10 + 2*2). So, at that price, the market experienced a shortage of 5 units.
Detailed explanation-3: -Economists call this situation an “excess supply” – that is the quantity demanded is less than the quantity supplied at the given price. This is also called a surplus. So, if the price is too high, sellers will have leftover chickens.
Detailed explanation-4: -Excess Demand and Excess Supply When the price gets lower than its equilibrium price, excess demand occurs, and the quantity received from manufacturers are lower than what consumers have demanded. On the other hand, Excess supply is the kind of situation where a price is more than its equilibrium price.