In the case of a surplus,
A)there is no need for adjustment because equilibrium is rarely perfect.
B)the quantity supplied exceeds the quantity demanded at the current price level.
C)producer incomes will fall and production will rise in order to make up for the shortfall.
D)market price will rise.
E)the quantity demanded exceeds the quantity supplied at the current price level.

Question

Quizplus · Accepted Answer

In the case of a surplus, the quantity supplied exceeds the quantity demanded at the current price level. This means that there are more goods or services available than buyers willing to purchase them, which may result in unsold inventory and a decrease in the market price to incentivize buyers. Adjustments are necessary for the market to return to equilibrium where the quantity supplied equals the quantity demanded. However, it is not true that producer incomes will fall and production will increase to make up for the shortfall because there is an excess supply of goods or services. Option D is also not true because the market price will typically fall, not rise, when there is a surplus.

In the Case of a Surplus