If the market price rises from P0 to P2 in the above figure, then there is a
A) surplus equal to the distance Q0, Q2.
B) surplus equal to the distance Q1, Q2.
C) shortage equal to the distance Q0, Q2.
D) shortage equal to the distance Q1, Q2.

Question

Quizplus · Accepted Answer

When the market price rises from P0 to P2, the quantity supplied increases from Q0 to Q2, and the quantity demanded decreases from Q1 to Q2. The difference between the higher quantity supplied (Q2) and the lower quantity demanded at this new price level (Q1) results in a surplus, which is correctly represented by the distance between Q1 and Q2.

If the Market Price Rises from P0 to P2 in the Above