Multiple Choice
In the context of market equilibrium, what is the term for a situation where the quantity supplied is less than the quantity demanded at a given price?
74
views
3. The Market Forces of Supply and Demand
Market Equilibrium
Multiple Choice
Which of the following is most likely to occur as a result of a decrease in the equilibrium price for a product?
A
Producers will increase production.
B
The quantity supplied will decrease.
C
The market will experience a surplus.
D
The quantity demanded will decrease.
Verified step by step guidance1
Step 1: Understand the concept of equilibrium price, which is the price at which the quantity demanded by consumers equals the quantity supplied by producers.
Step 2: Recognize that a decrease in the equilibrium price means the market price is lower than before, affecting both quantity demanded and quantity supplied.
Step 3: Recall the law of supply, which states that producers are willing to supply more of a product at higher prices and less at lower prices. Therefore, a decrease in price typically leads to a decrease in quantity supplied.
Step 4: Consider the law of demand, which states that consumers will demand more of a product at lower prices, so quantity demanded usually increases when price decreases.
Step 5: Analyze the options: since price decreased, quantity supplied decreases (not increases), quantity demanded increases (not decreases), and a surplus (excess supply) is unlikely because lower prices reduce supply and increase demand.
Related Videos
Related Practice
