If equilibrium price of a good is greater than its market price, expla – InterviewSolution

1.

If equilibrium price of a good is greater than its market price, explain all the changes that will take place in the market. Use a schedule.

Answer»

Price (P_x) (in Rs.)	DD (D_x) (in Units)	SS (S_x) (in Units)
2	40	5
3	30	10
4	20	20
5	10	25

Suppose equilibrium price is Rs.4 per unit and market price is Rs.3. At this market price demand is greater than supply.

This will result in competition among buyers resulting rise in price. When price rises to Rs4, DD = SS or 20 = 20.

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