According to the above figure, a shortage will occur at a price at which
A) quantity demanded equals quantity supplied.
B) quantity demanded exceeds quantity supplied.
C) quantity supplied exceeds quantity demanded.
D) government sets a price above equilibrium.

Question

Quizplus · Accepted Answer

In the above figure, the equilibrium price is P0 where the quantity demanded (Qd) and quantity supplied (Qs) are equal. If the price is lower than P0, there will be an excess demand, and if the price is higher than P0, there will be excess supply. Therefore, a shortage will occur at a price above the equilibrium price where quantity demanded exceeds quantity supplied. Hence, the correct answer is B.

According to the Above Figure, a Shortage Will Occur at a Price