economics
This query is : Resolved
06 June 2009
I am student of CPT.I want to know the answer of this
question
Q. if price is forced to stay below equilibrium price
(a) excess supply exists
(b) excess demand exists
(c) either a or b
(d) both
according to me answer is (a) But in cpt software modal answer is (b) and also checked it in modal paper it is (b)
even in a scanner answer is (b)
what is logic behind ans (b)
please guide me
question
Q. if price is forced to stay below equilibrium price
(a) excess supply exists
(b) excess demand exists
(c) either a or b
(d) both
according to me answer is (a) But in cpt software modal answer is (b) and also checked it in modal paper it is (b)
even in a scanner answer is (b)
what is logic behind ans (b)
please guide me
07 June 2009
the logic is easy
there is direct relationship between price and supply ( when price goes up supply falls).
similarly there is inverse relationship between price and demand( when price goes down demand falls).
so when price is low
demand will rise, and supply will be low
hence option (b) is correct
there is direct relationship between price and supply ( when price goes up supply falls).
similarly there is inverse relationship between price and demand( when price goes down demand falls).
so when price is low
demand will rise, and supply will be low
hence option (b) is correct
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