Question

The graph shows excess demand.

A graph titled Excess supply has quantity on the x-axis and price on the y-axis. A line with positive slope represents supply and a line with negative slope represents demand. The lines intersect at the point of equilibrium (p star, Q star). A point on the demand line is (P 2, quantity demanded) and a point on the supply line is (P 2, quantity supplied). Both points are lower than the point of equilibrium. Excess demand is indicated between the 2 points.

Which needs to happen in order to stop disequilibrium from occurring?

a) Q needs to be coordinated with supply.
b) Q needs to be coordinated with demand.
c) The price of goods needs to be increased.
d) The price of goods needs to be decreased.

Answer 1

c) The price of goods needs to be increased

Step-by-step explanation:

From the details of the Excess supply graph, we have;

The y-axis = The quantity supplied

The x-axis = The price

The supply = The line with positive slope

The demand = The line with negative slope

The point of intersection of the lines = (p

A point on the demand line = (P*, Q*)

A point on the demand line = (P₂, Quantity demanded)

A point on the supply line = (P₂, Quantity supplied)

The excess demand = The distance between the points having the same x-value P₂

Therefore, to stop disequilibrium, from occurring, the price of goods needs to be increased