In a competitive market, when price is below the equilibrium price, there will be pressure for the price to:Question 16Select one:a.fall.b.stay the same.c.rise.d.change only if demand and/or supply change.
Question
In a competitive market, when price is below the equilibrium price, there will be pressure for the price to:Question 16Select one:a.fall.b.stay the same.c.rise.d.change only if demand and/or supply change.
Solution
c. rise.
Here's why:
In a competitive market, the equilibrium price is determined by the intersection of the supply and demand curves. This is the price at which the quantity demanded by consumers equals the quantity supplied by producers.
If the price is below the equilibrium price, the quantity demanded by consumers will exceed the quantity supplied by producers. This creates a shortage in the market.
In response to this shortage, producers will increase their prices in an attempt to balance supply and demand. This puts upward pressure on the price.
Therefore, when the price is below the equilibrium price in a competitive market, there will be pressure for the price to rise.
Similar Questions
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