Question

The graph shows excess supply. 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 higher than the point of equilibrium. Excess supply is indicated between the 2 points. Which needs to happen to the price indicated by p2 on the graph in order to achieve equilibrium?

Answer 1

What would happen to price on P2 is that price would rise and demand would go down until equilibrium is reached.

What is excess demand?

Excess demand is when quantity demanded exceeds quantity supplied. Excess demand occurs when the price of a good is below equilibrium price. As price rises, the quantity demanded would begin to fall until equilibrium is reached.

Answer 2

B.) It needs to be decreased

Step-by-step explanation:

There's no picture attached, but equilibrium is in the middle, therefore decreasing the supply meets in the middle (where the equilibrium is).