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Giving reasons, state whether the following statements are true or false:(i) When equilibrium price of a good is less than the market price, there will be competition among the sellers.(ii) Excess supply of a commodity exists when its market price is greater than its equilibrium price. |
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Answer» (i) True. Because when the prevailing market price is higher than the equilibrium price there will be excess supply, and since the sellers will not be able to sell all they want to sell, there will be competition among sellers. (ii) True. Excess supply occurs when the market price is greater than the equilibrium price. This leads to commodity among sellers as a result of which price starts falling and again market price becomes equal to equilibrium price. |
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