Managerial Economicsintermediate
Match each market condition with its likely price pressure or outcome.
Answer
Price below equilibrium - Excess demand and upward price pressure; Price above equilibrium - Excess supply and downward price pressure; Demand increase, supply unchanged - Higher equilibrium price and quantity; Supply increase, demand unchanged - Lower equilibrium price and higher quantity
Explanation
### The pairs
| Item | Matches | Why |
|---|---|---|
| Price below equilibrium | Excess demand and upward price pressure | Buyers want more than sellers offer at the low price. |
| Price above equilibrium | Excess supply and downward price pressure | Sellers offer more than buyers want at the high price. |
| Demand increase, supply unchanged | Higher equilibrium price and quantity | Greater demand raises both equilibrium outcomes when supply does not shift. |
| Supply increase, demand unchanged | Lower equilibrium price and higher quantity | Greater supply lowers price while increasing equilibrium quantity. |
### Remember
Identify the curve that shifts before predicting the new equilibrium.
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