Why does the market price rise if it is below the equilibrium price?

If the market price is below the equilibrium price, quantity supplied is less than quantity demanded, creating a shortage. The market is not clear. It is in shortage. Market price will rise because of this shortage.Click to see full answer. In this regard, when the price of a good is lower than the equilibrium price? When Price is Lower than Equilibrium This is depicted in Figure 3.6c with a market price of $1.0. When price is too low, the quantity demanded is greater than quantity supplied. This excess demand is known as a shortage. In this situation, the low price causes an excess of buyers. what is the equilibrium price in this market? The equilibrium price is the market price where the quantity of goods supplied is equal to the quantity of goods demanded. This is the point at which the demand and supply curves in the market intersect. To determine the equilibrium price, you have to figure out at what price the demand and supply curves intersect. Accordingly, why is it advantageous for the market price to be at equilibrium? The lower price entices more people to buy, which will reduce the supply further. This process will result in demand increasing and supply decreasing until the market price equals the equilibrium price. If the market price is below the equilibrium value, then there is excess in demand (supply shortage).Can you tell for certain that the new equilibrium price will be higher or lower than the old equilibrium price?We cannot tell for certain whether new equilibrium price will be higher or lower than the old equilibrium price. – Both demand and supply decrease but demand decreases more than supply.

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