Excess demand occurs when
A) the actual price is greater than the equilibrium price
B) equilibrium is undefined
C) consumer wants are unlimited
D) the actual price is less than the equilibrium price
E) the market is in equilibrium

Question

Quizplus · Accepted Answer

Excess demand occurs when the actual price is less than the equilibrium price, causing a shortage in the market. This means that the quantity demanded exceeds the quantity supplied at the given price level, resulting in buyers competing for a limited number of goods. As a result, the market price will increase until the excess demand is eliminated and the market reaches equilibrium again.

Excess Demand Occurs When