Final answer:
When price exceeds its equilibrium value, the quantity bought and sold decreases due to a surplus, leading to potential price adjustments. Market forces such as changes in demand and supply affect the equilibrium price and quantity, with impacts evident across product and labor markets.
Step-by-step explanation:
When the price exceeds its equilibrium value, the quantity bought and sold decreases. This is because, at a price above equilibrium, the quantity supplied exceeds the quantity demanded, leading to a surplus. Sellers may then lower their prices to eliminate the surplus, moving the market back towards equilibrium.
In the context of market adjustments, different scenarios can affect the equilibrium price and quantity:
- Increase in demand: This typically leads to a higher equilibrium price and quantity if supply cannot perfectly match the increase in demand.
- Decrease in demand: This scenario often results in a lower equilibrium price and quantity.
- Increase in supply: If demand remains constant, an increase in supply generally leads to a lower equilibrium price and a higher quantity sold.
- Decrease in supply: If demand remains constant, a decrease in supply usually results in a higher equilibrium price and a lower quantity sold.
These outcomes are observable in both the product market and the labor market. For example, if new technology or economies of scale enable a large increase in supply, the equilibrium price may decline. Conversely, if inputs become scarce or wages rise, an increasing cost scenario may emerge, lifting the equilibrium price.