If the price of a good is below the equilibrium price,

Question

Quizplus · Accepted Answer

If the price of a good is below the equilibrium price, there will be an excess supply, also known as a surplus, as the quantity supplied will exceed the quantity demanded. In order to clear the market, producers will offer lower prices, leading to a decrease in the price until it reaches the equilibrium level where the quantity demanded equals the quantity supplied. Therefore, the price will fall.

If the Price of a Good Is Below the Equilibrium