question archive If the price of a good increases and is above the equilibrium price, then: a) Suppliers' inventories will build up, they will reduce output, and lower prices
If the price of a good increases and is above the equilibrium price, then: a) Suppliers' inventories will build up, they will reduce output, and lower prices
Subject:MarketingPrice:2.88 Bought3
If the price of a good increases and is above the equilibrium price, then:
a) Suppliers' inventories will build up, they will reduce output, and lower prices.
b) Demand will exceed supply and there will be a shortage in the market.
c) The demand curve will shift to the left until equilibrium is established at the new higher prices.
d) The supply curve will shift to the right until equilibrium is established at the new higher price.
e) Consumers will bid down the good's price, but there will be no reduction in output.
Purchase A New Answer
Custom new solution created by our subject matter experts
GET A QUOTE
Answer Preview
The answer is a).
When the price is above the equilibrium price, then there is a surplus in the market - price supplied is higher than the quantity demanded. Hence, producers will build up inventories. Realizing that they cannot sell all that are produced, producers will reduce output and lower price in order to sell the inventories.
