How do price and quantity move to equilibrium in a perfectly competitive market?
Please provide the best answer for the statement.
Answer: If prices move above equilibrium, there will be a surplus that drives the price back down to equilibrium. If price falls below equilibrium, then a shortage may occur, which will drive the price back up to equilibrium. When quantity is less than equilibrium, profits will increase and attract new sellers. New sellers will increase the quantity to equilibrium. If there is surplus quantity, prices will fall, driving sellers out. This will lower the quantity back to equilibrium.
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