Assume that there is a surplus in the market for hybrid automobiles.Which of the following statements correctly describes this situation?
A)The supply of hybrid automobiles is greater than the demand for hybrid automobiles.
B)Some consumers will be unable to obtain hybrid automobiles at the market price and will have an incentive to offer to buy the product at a higher price.
C)The price of hybrid automobiles will fall in response to the surplus; as the price falls the quantity demanded will increase and the quantity supplied will decrease.
D)The surplus will cause an increase in the equilibrium price of hybrid automobiles.

Question

Quizplus · Accepted Answer

A surplus occurs when the quantity supplied exceeds the quantity demanded at the current market price. This means that there are unsold hybrid automobiles in the market, which puts pressure on sellers to lower their prices to clear their inventories. As the price falls, the quantity demanded will increase and the quantity supplied will decrease until they are equalized at a new equilibrium price where there is no surplus. Therefore, option C is the correct statement. Option A is incorrect as it implies that the surplus is due to oversupply rather than a mismatch between supply and demand. Option B is incorrect as it assumes that there are buyers willing to pay more than the market price, which contradicts the concept of a surplus. Option D is incorrect as it suggests that the surplus will lead to a shortage and a higher price, which is not true for surplus situations.

Assume That There Is a Surplus in the Market for Hybrid