Question

When the current price of an item is greater than the item's market clearing price:_________.

A) supply is greater than demand.
B) demand is greater than supply.
C) quantity supplied is greater than quantity demanded.
D) quantity supplied is less than quantity demanded.

Answer 1

C) quantity supplied is greater than the quantity demanded.

Step-by-step explanation:

We need not be confused, the market-clearing price is referring to the equilibrium price. Thus, if the current price is above the market-clearing price (that is, the price at which quantity demanded equals quantity supplied), it means the quantity supplied is greater than the quantity demanded of the item.

For example, at a price of $1 per orange, there's an equal amount in quantity demanded and quantity supplied of orange. However, the price increases to $2 per orange; which makes the current price of an orange greater than the market-clearing price of $1.