Assume the current market price of candles is such that there is a surplus (i.e.,excess supply).Which of the following best describes the adjustment process in a competitive market?

Question

Quizplus · Accepted Answer

In a competitive market, if there is a surplus of candles, the market price is above the equilibrium price. In this situation, producers will want to sell more candles than consumers want to buy, and there will be excess supply. To eliminate the surplus, producers will lower their prices to encourage consumers to buy more candles. As the price decreases, the quantity demanded of candles will increase while the quantity supplied will decrease. This adjustment process will continue until the market reaches equilibrium, where the quantity demanded and the quantity supplied are equal, and there is no surplus or shortage. Therefore, choice C is the best description of the adjustment process in a competitive market.

Assume the Current Market Price of Candles Is Such That