Imagine a free market in equilibrium. After a sudden increase in supply (but before the price can adjust), the market experiences a:
A) shortage.
B) surplus.
C) no change.
D) new equilibrium.

Question

Quizplus · Accepted Answer

After a sudden increase in supply, the quantity supplied would exceed the quantity demanded at the original price, leading to a surplus. This would cause sellers to lower the price in order to clear the market, eventually leading to a new equilibrium. However, the initial reaction would be a surplus.

Imagine a Free Market in Equilibrium