If the market price falls from P0 to P1 in the above figure, then
A) a new equilibrium quantity is established.
B) there is a shortage equal to the distance EF.
C) there will be a further tendency for price to fall.
D) there is a surplus of goods on the market equal to the distance Q1, Q2.

Question

Quizplus · Accepted Answer

When the market price falls from P0 to P1, the quantity demanded exceeds the quantity supplied, creating a shortage in the market. This shortage is represented by the distance EF on the graph, where E and F are points on the demand and supply curves, respectively, at the new price level P1.

If the Market Price Falls from P0 to P1 in the Above