Question

Which of the following scenarios would cause a surplus in a market? a. The actual price is $20, the equilibrium price is $25, the quantity demanded is 100 and the quantity supplied is 75. b. The actual price is $25, the equilibrium price is $20, the quantity supplied is 100 and the quantity demanded is 75. c. The actual price is $25, the equilibrium price is $20, the quantity demanded is 100 and the quantity supplied is 75. d. The actual price is $20, the equilibrium price is $25, the quantity supplied is 100 and the quantity demanded is 75.

Answer 1

Answer:

The correct answer is option b.

Explanation:

A market will experience a surplus when the quantity supplied is higher than the quantity demanded. The quantity supplied will be more than the quantity demanded when the actual price is higher than the equilibrium price.  

This is because of the law of supply and the law of demand. At a higher price, the firms will supply more but the consumers will demand less.  

So the market will be in surplus when the actual price is $20, the equilibrium price is $25, the quantity supplied is 100 and the quantity demanded is 75.