If the price ofa good is above equilibrium price then,(a) There is a surplus and the price will rise.(b) There is a surplus and the price will fall(c) There is shortage and the price will fall(d) The quantity demanded is equal to the quantity supplied and the price remainsunchanged.

Market equilibrium is a stable situation in which the quantity demanded by the consumers and the…

Answered: If the price of a good is above…

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Economics

If the price of a good is above equilibrium price then,

Economics Today and Tomorrow, Student Edition

1st Edition

ISBN:9780078747663

Author:McGraw-Hill

Publisher:McGraw-Hill

Chapter7: Demand And Supply

Section: Chapter Questions

Problem 19AA

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Assume gadgets are sold in a competitive market, the equilibrium price is $6, and the equilibrium quantity is 500 units.(a) Using the numerical values above, draw a correctly labeled graph of the market for gadgets and show each of the following.(i) The equilibrium price(ii) The equilibrium quantity(b) At a price of $8 per unit, will there be a surplus or a shortage in the market? Explain.(c) Assume gadgets now become more popular. On your graph in part (a), show the effect of the increase in gadgets' popularity on the equilibrium price and quantity of gadgets.(d) Assume instead there is an increase in the price of tin, a major input in producing gadgets. What will be the effect of an increase in the price of tin on the market for gadgets?(e) If both changes in part (c) and part (d) occurred simultaneously, will the equilibrium quantity of gadgets increase, decrease, remain unchanged, or be indeterminate? Explain.