Q:How is equilibrium attained? A: At a price higher than the equilibrium price, quantity supplied is higher than quantity demanded. There is a surplus. Producers will lower their price to reduce extra stock. In response to the lower price, consumers purchase more, eventually reaching the equilibrium price and quantity when price is no longer lowered and quantity demanded no longer increases. At a price lower than the equilibrium price, quantity demanded is more than quantity supplied. There is a shortage. Consumers bid up the price, increasing prices. In response to the increased prices, producers produce more, and this goes on until the price and quantity reaches the equilibrium price, where quantity demand and quantity supplied equates.
Posted on: Sun, 21 Jul 2013 14:31:55 +0000
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