Question

In a market with an upward sloping supply curve and a downward sloping demand curve, when there is an excess supply, the actual price must be higher than the equilibrium price. the actual price must be lower than the equilibrium price. the quantity demanded is higher than the equilibrium quantity.

Answer 1

The correct answer is: the actual price is higher than equilibrium price.

Step-by-step explanation:

With a downward sloping demand curve and upward-sloping supply curve, excess supply means that the supply is more than quantity demanded. The actual price is higher than the equilibrium price level.

We are aware that price and supply are directly related, so the firms will supply more at a higher price. But price and quantity demanded are inversely related, so at higher price, the consumers will demand less quantity of the product.

Thus excess supply is created in the market at a price higher than the equilibrium price.