Managerial Economicsintermediate
Arrange the market-adjustment sequence when price is below equilibrium.
Answer
Price is below the equilibrium level, Quantity demanded exceeds quantity supplied, Excess demand puts upward pressure on price, Price moves toward equilibrium
Explanation
### The order
1. **Price is below the equilibrium level**: this is the initial market condition.
2. **Quantity demanded exceeds quantity supplied**: at the low price, buyers seek more than sellers offer.
3. **Excess demand puts upward pressure on price**: buyers' competition encourages a price rise.
4. **Price moves toward equilibrium**: the adjustment reduces the gap between planned purchases and sales.
### The concept
The adjustment process links a disequilibrium price to the excess demand or supply it creates. It describes pressure toward equilibrium, not an assurance that adjustment is immediate or free from other changes.
### Remember
Below equilibrium, compare demand with supply before predicting price pressure.
Related Questions
- Which description best defines managerial economics?(basic)
- Under the SMARTTS framework, an objective with a stated deadline is _____.(basic)
- An increase in income always moves a consumer to a different point on the same demand curve.(intermediate)
- A price above equilibrium creates excess demand and tends to push price upward.(basic)
- What does a production function represent?(basic)
Want to practice more questions like this?
Join myBenkio free and practice past questions for your Nigerian university courses with AI explanations for every answer.
Start Practicing Free