Refer to the above figure. Other things being equal, if price is at P2, then we would expect
A) price to decline until an equilibrium is achieved at P0.
B) consumers to reduce their offering price for the good.
C) an excess quantity demanded to occur.
D) consumers to bid against each other for goods and force the price still higher.

Question

Quizplus · Accepted Answer

At price P2 there is an excess supply of the good, as the quantity supplied (Q2) is higher than the quantity demanded (Q1). Therefore, suppliers will compete with each other to sell the good, and prices will fall until an equilibrium point is reached at P0, where demand equals supply.

Refer to the Above Figure