Final answer:
When the price of a product is below equilibrium, the quantity supplied is less than the quantity demanded, causing a shortage. Sellers may raise prices to reduce this shortage, which brings the quantity supplied and quantity demanded closer to equilibrium.
Step-by-step explanation:
When the price of a product drops below its equilibrium price, there is an impact on the quantity supplied and quantity demanded. Specifically, if the price drops to $100 and we know that at this price the quantity demanded is 20,000 units and quantity supplied is 10,000 units, there would be a shortage in the market. This means that the demand for the product exceeds the supply. Sellers may respond to this by increasing the product price, which would then increase the quantity supplied as suppliers take advantage of higher prices to sell more, and decrease quantity demanded as consumers may seek substitutes or buy less due to the price hike. Thus, if the price increases to $120, the quantity demanded would typically decrease, and the quantity supplied would increase, likely reducing the shortage. However, without specific quantities demanded and supplied at $120, we cannot determine the exact size of the shortage or surplus.