Explain the chain effects, if the prevailing market price is below the

1.	Explain the chain effects, if the prevailing market price is below the equilibrium price.
Answer» <html><body><p></p>Solution :The equilibrium <a href="https://interviewquestions.tuteehub.com/tag/price-1165141" style="font-weight:bold;" target="_blank" title="Click to know more about PRICE">PRICE</a> is the price at which the quantity demanded is equal to quantity supplied. If the market price is less than the equilibrium price then there will be <a href="https://interviewquestions.tuteehub.com/tag/excess-978535" style="font-weight:bold;" target="_blank" title="Click to know more about EXCESS">EXCESS</a> demand in the economy. As a result of this excess demand, there will be competition between the buyers leading to an increase in price. This increase in price will lead to a fall in demand <a href="https://interviewquestions.tuteehub.com/tag/according-366619" style="font-weight:bold;" target="_blank" title="Click to know more about ACCORDING">ACCORDING</a> to law of demand and increase in supply according to law of supply. All these changes will <a href="https://interviewquestions.tuteehub.com/tag/continue-409821" style="font-weight:bold;" target="_blank" title="Click to know more about CONTINUE">CONTINUE</a> to take place until quantity demanded <a href="https://interviewquestions.tuteehub.com/tag/equals-974070" style="font-weight:bold;" target="_blank" title="Click to know more about EQUALS">EQUALS</a> quantity supplied.</body></html>

Explain the chain effects, if the prevailing market price is below the equilibrium price.