The table shows the quantity demanded and supplied at the current price. Measure Value Current price $8 Quantity demanded 3000 Quantity supplied 5000 To res...
Question 1 Report
The table shows the quantity demanded and supplied at the current price.
| Measure | Value |
|---|---|
| Current price | $8 |
| Quantity demanded | 3000 |
| Quantity supplied | 5000 |
Answer Details
The correct answer is decrease to reduce the surplus.
At the current price of $8, quantity supplied (5000) exceeds quantity demanded (3000), creating a surplus (excess supply) of 2000 units.
To restore equilibrium, the price needs to fall. A lower price will:
- Increase quantity demanded (consumers buy more at lower prices, following the law of demand).
- Decrease quantity supplied (producers supply less at lower prices, following the law of supply).
These two adjustments work together to eliminate the surplus and bring the market to equilibrium, where quantity demanded equals quantity supplied.
Increasing the price would widen the surplus. Government price-fixing is not necessary since the market can self-correct through the price mechanism.
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