Question

f the supply and demand curves intersect at a price of $7, then any price above that would result in:

A)

equilibrium

B)

an increase in demand

C)

a surplus.

D)

a shortage.

Suppose due to a faster than usual decrease in population, there is an excess supply for water in Manitoba. This means that we can expect the price of water to increase in Manitoba over time.

Question 39 options:
A) True
B) False

Answer 1

If the demand and supply curve intersects at a price of $7 , then any price above that would result in :

Answer: C) Surplus . When demand and supply curve intersects each other it shows equilibrium . Any price above equilibrium (here $7) would result in surplus of a good . Surplus of good means the quantity demanded of a good is less than quantity supplied. When price increases above equilibrium it results in reduction of demand. Supply exceeds more than demand causing surplus of good.

Incorrect options:

Equilibrium: equilibrium here has already occurred at $7 by the intersection of demand and supply curve.

Increase in demand: increase in demand occurs when other factors change and price is held constant . Here price is being set above equilibrium price which shows price is changing.

Shortage: shortage of a good occurs when equilibrium price is set below equilibrium. Lower price results in more quantity demanded than quantity supplied. Less quantity supplied and more quantity demanded of a good shows shortage of the good.

(Refer to attached image for more clarity)($3 and $8 in graph are imaginary figures)