When price is set below equilibrium, this will lead to
ECONOMICS
JAMB 2014
When price is set below equilibrium, this will lead to
- A. an increase in the quantity supplied
- B. a new equilibrium
- C. a decrease in the quantity supplied
- D. a fall in price
Correct Answer: C. a decrease in the quantity supplied
Explanation
If the market price is below the equilibrium price, quantity supplied is less than quantity demanded, because producers will not be willing to supply more goods when the price being paid is too small thereby creating a shortage.
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