Question

If the market price ​'Pmkt​' is above the price ​'P0​', then quantity supplied is_________ equal to greater than quantity demanded and the market is in_________.

Answer 1

When the market price is above the equilibrium price, quantity supplied is greater than quantity demanded, resulting in a surplus.

Step-by-step explanation:

If the market price 'Pmkt' is above the price 'P0', then quantity supplied is greater than quantity demanded and the market is in a surplus. When a price is set above the equilibrium price, the higher price makes it more profitable for producers to increase their output, leading to an increased quantity supplied. Similarly, the higher price results in a decrease in the quantity demanded. This situation results in an excess supply, also known as a surplus. Market forces typically then work to lower the price, increase demand, and reduce the quantity supplied until the surplus is eliminated and the market returns to equilibrium.

Answer 2

The quantity supplied at this level of price is less than the quantity demanded and therefore the market is in shortage situation.

Step-by-step explanation:

If the current price of the market is above the price P0, then the level of the quantity supplied of the good is less than the level of quantity demanded of that good at this level. With the less quantity supplied, there will be a situation of shortage of the quantity of goods in the market.