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If at a given price of a commodity, ther...

If at a given price of a commodity, there is excess demand, how will the equilibrium price be reached? Explain by diagram.

Text Solution

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Excess demand means that the demand for the commodity is higher than its supply or the market price is lower than the equilibrium price. In such a case, the price is pushed up due to competition among buyers. This increased price leads to an increase in supply and a fall in demand leading a new equilibrium where quantity demanded equals quantity supplied.
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If at a given price of the commodity there is excess demand, how will the equilibrium price be reached4? Explain with the help of a diagram. OR If equilibrium price of a good is grcater than its market price, explain all the changes that will take place in the market. Use diagram. OR Explain the changes that will take place in the market for a commodity if the prevailing market price is less than the equilibrium price.

If at a given price of the commodity there is excess supply, how will the equilibrium price be reached? Explain with the help of a diagram. OR How will equilibrium price be reached when there is excess supply? Explain with a diagram. OR Explain the series of changes that will take place if market price is higher than equilibrium price. OR At a given price ofa commodity there is excess supply. Is it an equilibrium price? If not, how will the equilibrium price be reached? (use diagram) OR Suppose price of a good is higher than equilibrium price. Explain changes that will establish equilibrium supply.

Knowledge Check

  • When actual price of a commodity is less than equilibrium price, its price:

    A
    Starts risisng
    B
    starts falling
    C
    starts fluctuating
    D
    remains constant

  • When actual price of a commodity is less than equilibrium price, its price :

    A
    Starts rising
    B
    Starts falling
    C
    Starts fluctuating
    D
    Remains constant

  • If the price of a commodity is below the equilibrium price, then quantity supplied is - than the quantity demanded. However, if the price is above in equilbirium price, then quantity supplied is - than the quantity demanded.

    A
    Less, more
    B
    Less, less
    C
    More, less
    D
    More, More

    • Similar Questions

    Explore conceptually related problems

    If there is excess supply at a given price, then how will the equilibrium price be reached? Explain by diagram.

    How is equilibrium reached if there is excess demand at a price lower than equilibrium price?

    If the demand and supply of a commodity both increase, the equilibrium price may not change, may increase, may decrease." Explain by using diagrams.

    What would be an effect on equilibrium price and quantity when demand and supply both shifts rightward? Or What would be an effect on equilibrium price and quantity when there is simultaneous increase in demand and supply? "If the demand and supply of a commodity both increase, the equilibrium price may not change, may increase, may decrease." Explain using diagrams. Or Market for a good is in equilibrium. There is simultaneous increase" both in demand and supply of the good. Explain its effect on market price.

    In case of excess demand, equilibrium price is less than prevailing price.

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