What is a market surplus, and how does the market attempt to resolve a surplus?
What will be an ideal response?
At a price higher than equilibrium, a surplus will occur. There will be pressure on sellers to lower prices to sell merchandise. For example, when a merchant must sell holiday gift wrap at a low price after the holiday, it means that the price was too high immediately after the holiday and this caused an after-holiday surplus. As the price falls, more consumers are willing to buy the item, and fewer sellers are willing to sell the item. The price keeps falling until quantity supplied equals quantity demanded.
You might also like to view...
The marginal propensity to consume is the proportion of each new dollar's worth of income that is spent
Indicate whether the statement is true or false
Which of the following is true for a monopolist?
a. The firm has a perfectly elastic demand curve. b. The firm has a perfectly inelastic demand curve. c. The straight-line demand curve is above the marginal revenue curve. d. The marginal revenue curve is above the demand curve. e. All of these.
_____ is an arrangement between an attorney and the plaintiff, in which the latter agrees to pay a certain fraction of the money he/she wins to the former
a. Hourly billing b. Capitation c. Contingency d. Unitization
A country on a gold standard was able to maintain people's confidence in the value of its currency by:
a. printing more and more paper money. b. restricting international exchange of goods and services. c. ensuring the convertibility of paper money into gold. d. maintaining a fixed stock of foreign currencies. e. ensuring balance of payment surplus.