What is true if the price of a good is above the equilibrium price?
A. There is a surplus and the price will rise B. There is a surplus and the price will fall C. There is a shortage and the price will rise D. There is a shortage and the price will fall E. The quantity demanded is equal to the quantity supplied and the price remains unchanged
W. Wright, Biology student, Biology student, Astoria
Answered Apr 10, 2019
The correct answer here is answer B: there is a surplus and the price will fall. This is simply a matter of understanding how the equilibrium chart for supply and demand works (or a supply and demand curve, for those who haven’t taken higher economics classes). The supply of a good goes up as demand goes down, and the demand for a good goes up as the supply goes down.
The place where the two lines intersect on a graph is the equilibrium price: the point at which a customer is most happy to pay for the supply which is on hand.
If the price is too high, there’s going to be a surplus and price will fall in the