In the short run, if prices were above equilibrium,
A) excess aggregate demand for goods and services would place downward pressure on prices.
B) excess aggregate supply of goods and services would place upward pressure on prices.
C) excess aggregate demand for goods and services would place upward pressure on prices.
D) excess aggregate supply of goods and services would place downward pressure on prices.

Question

Quizplus · Accepted Answer

If prices were above equilibrium, it would mean that the market is in a state of excess supply, as suppliers would be producing more than consumers are willing to buy at that price. Hence, suppliers would be forced to lower their prices in order to sell their goods, putting downward pressure on prices. This would ultimately move the market back towards the equilibrium price.

In the Short Run, If Prices Were Above Equilibrium