Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 5: Problem 16

When market price is above equilibrium price, the market price will be driven __________.(LO6) a) up by unhappy buyers b) up by unhappy sellers c) down by unhappy buyers d) down by unhappy sellers

Short Answer

Expert verified
d) down by unhappy sellers

Step by step solution

01

Understand Market Equilibrium

Market equilibrium occurs when the quantity of goods or services demanded by consumers is equal to the quantity supplied by producers. In this situation, market price remains stable, and both buyers and sellers are satisfied with the price.
02

Understand the scenario when market price is above equilibrium price

When the market price is above the equilibrium price, the quantity of goods or services supplied by producers will be higher than the quantity demanded by consumers. In this case, there will be a surplus or excess supply in the market.
03

Identify the behavior of unhappy buyers and sellers due to surplus

In the presence of a surplus, sellers will be unhappy as their goods are not being sold entirely at the higher price, while buyers will also be unhappy as they are being asked to pay more than the equilibrium price. Since producers have excess inventory, they will be willing to lower the price to clear their stock, making the consumer more willing to purchase at a lower price. In response, the market price will gradually decrease.
04

Choose the correct answer

Based on the analysis above, the market price will be driven down by unhappy sellers in order to clear their inventory and to reach an equilibrium. Therefore, the correct answer is: d) down by unhappy sellers

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

As price rises __________. (LO4) a) supply rises b) supply falls c) quantity supplied rises d) quantity supplied falls

If the rise in the price of service A leads to a fall in the price of service \(B\), we may conclude that __________. (LO2) a) services A and B are substitutes b) services \(A\) and \(B\) are complements c) services A and B are neither substitutes nor complements

For questions 31-34, use choices a, b, c, d, e, and f. (LO8) a) may rise, fall or remain the same b) may rise or remain the same c) may fall or remain the same d) will rise e) will fall f) will remain the same If demand falls and supply rises, then equilibrium quantity __________.

A decrease in demand means that the quantity demanded __________(LO2) a) does not fall at any price b) falls only at the equilibrium price c) falls at a few prices d) falls at most prices e) falls at all prices

$$ \text { If the price of cameras falls, there will be a(n) } $$ __________a) decrease in the demand for film b) decrease in the quantity of cameras demanded c) decrease in the supply of cameras d) increase in the demand for cameras e) increase in the quantity of cameras demanded
See all solutions

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free