The price of a good will tend to fall if
A)there is a surplus at the current price.
B)the current price is below the equilibrium price.
C)the quantity supplied exceeds the quantity demanded at the current price.
D)Both A and C are true.
E)None of the above are true.

Question

Quizplus · Accepted Answer

If there is a surplus at the current price, it means that the quantity supplied exceeds the quantity demanded at that price. This indicates that the market price is higher than the equilibrium price, and there are more sellers than buyers. In this situation, producers will lower the price of the good in order to increase demand and sell their inventory. Therefore, choice A is true. Similarly, if the quantity supplied is greater than the quantity demanded at the current price (which is the same as there being a surplus), then the price of the good would tend to fall. Therefore, choice C is also true. Hence, both A and C are correct, making choice D the correct answer.

The Price of a Good Will Tend to Fall If