Question

If the price is below the equilibrium level, then the quantity demanded will exceed the quantity supplied. This is known as ________________.

A. excess supply or surplus
B. excess demand or shortage
C. ceteris paribus
D. Equilibrium

Answer 1

When the price is below equilibrium, there is excess demand or a shortage. This means that the quantity demanded is greater than the quantity supplied at that price.

Step-by-step explanation:

When the price is below equilibrium, there is excess demand or a shortage. This means that the quantity demanded is greater than the quantity supplied at that price. For example, if the price of gasoline is below the equilibrium level, more people will want to buy gasoline than there is available supply, resulting in a shortage of gasoline. This situation creates economic pressures that push the price towards the equilibrium level.