When there is an excess supply in the market, competition will:
A) drive the price down to the equilibrium price.
B) drive the price up to the equilibrium price.
C) cause the demand curve to shift right.
D) cause the supply curve to increase.

Question

Quizplus · Accepted Answer

When there is an excess supply in the market, there are more suppliers than buyers. This creates competition among suppliers to sell their products, which forces them to lower their prices. As the price falls, the quantity demanded will increase until it reaches the equilibrium point where the quantity supplied is equal to the quantity demanded. Therefore, the correct choice is A, as competition will drive the price down to the equilibrium price.

When There Is an Excess Supply in the Market, Competition