What happens when the price of a product is set above its equilibrium level?

Show Answers

A surplus occurs and the price increases furtherA shortage develops and the price decreasesA shortage develops and the price increasesThe quantity demanded matches the quantity supplied, so the price stays the sameA surplus exists and the price will decline

Explanation

When the price is above the equilibrium, suppliers produce more than consumers want to buy, creating a surplus. To eliminate this excess, sellers lower the price, causing it to fall until it reaches equilibrium.