Question

How does a lower price alleviate the problem of excess supply? a lower price increases the number of potential sellers and the number of potential buyers. a lower price increases the number of potential sellers and decreases the number of potential buyers. a lower price decreases the number of potential sellers and the number of potential buyers. a lower price decreases the number of potential sellers and increases the number of potential buyers?

Answer 1

Excess supply decreases the number of potential sellers and increases the number of potential buyers. This situation will continue until an equilibrium is reached where the number of buyers will be roughly the same as the number of sellers. The price will continue to fall until a clearing of the market results in a steady state.