Question

One of the implications of the supply and demand model is that:

a) a market price below the equilibrium price will lead to a surplus.
b) supply shifts to the left whenever demand falls.
c) a rise in the price of a good always means that demand for it has increased.
d) government action is not necessary for a market to achieve equilibrium.

Answer 1

A market price below the equilibrium price leads to a surplus due to excess demand or shortage.

Step-by-step explanation:

One implication of the supply and demand model is that a market price below the equilibrium price will lead to a surplus. When the price is below equilibrium, the quantity demanded exceeds the quantity supplied, resulting in excess demand or a shortage. In this scenario, economic pressures will push the price towards the equilibrium level.