The graph shown depicts the market for a good. What state is this market in if the price of the good is $5?
A) There is a shortage (excess demand), signaling that sellers should leave the market.
B) There is a shortage (excess demand), signaling that buyers should bid up the price.
C) There is a surplus (excess supply), signaling that sellers should drop their price.
D) There is a surplus (excess supply), signaling that buyers should bid up the price.

Question

The graph shown depicts the market for a good. What state is this market in if the price of the good is $5?
A) There is a shortage (excess demand), signaling that sellers should leave the market. 
B) There is a shortage (excess demand), signaling that buyers should bid up the price. 
C) There is a surplus (excess supply), signaling that sellers should drop their price. 
D) There is a surplus (excess supply), signaling that buyers should bid up the price.

Quizplus · Accepted Answer

At a price of $5 in the given graph, the quantity demanded by buyers exceeds the quantity supplied by sellers, creating a shortage or excess demand. This signals buyers to increase their bids in order to purchase the limited quantity of goods available. Therefore, the best choice is B.

The Graph Shown Depicts the Market for a Good