"If,at the initial price,there is excess demand,the price will rise.As a consequence,the demand curve shifts down since people buy less at a higher price,and the supply curve shifts up because producers find it profitable to supply more output at a higher price.Price will continue to adjust until there is no excess demand." Which of the following is true about this statement?

Question

Quizplus · Accepted Answer

The statement confuses movements along the demand and supply curves (which occur in response to price changes) with shifts in the curves (which are caused by factors other than the price of the good itself).

"If,at the Initial Price,there Is Excess Demand,the Price Will Rise