Assume there is a surplus in the market for hybrid automobiles.Which of the following statements correctly describes this situation?
A)The supply of hybrid automobiles is greater than the demand for hybrid automobiles.
B)Some consumers will be unable to obtain hybrid automobiles at the market price and will have an incentive to offer to buy the product at a higher price.
C)The price of hybrid automobiles will fall in response to the surplus;as the price falls the quantity demanded will increase and the quantity supplied will decrease.
D)the surplus will cause an increase in the equilibrium price of hybrid automobiles.

Question

Quizplus · Accepted Answer

A surplus occurs when the quantity supplied exceeds the quantity demanded, meaning there are more hybrid automobiles available than consumers are willing to buy. The increase in supply with a constant demand leads to a downward pressure on prices until the market reaches a new equilibrium where the quantity demanded equals the quantity supplied. Therefore, the price of hybrid automobiles will fall in response to the surplus, and as the price falls, the quantity demanded will increase and the quantity supplied will decrease until the market reaches a new equilibrium. Option A is incorrect because it describes the surplus but doesn't explain the impact of the surplus on the market price. Option B is incorrect because it assumes that consumers are willing to pay a higher price, but the surplus indicates that there are already more hybrid automobiles in the market than there are consumers willing to buy. Option D is incorrect because a surplus usually leads to a decrease in the equilibrium price, not an increase.

Assume There Is a Surplus in the Market for Hybrid