A teacher in class was teaching the topic of Market Equilibrium. After explaining the basic concept, she posed a question to her students “Whenever market supply is not equal to market demand, what will happen to price?” Assume you are one of the students in her class. What will be your answer?

Price will remain same Price will increase Price will decrease Either 2 or 3

Either 2 or 3

If market supply is not equal to market demand, then two scenarios can be there. Either market supply is greater than market demand or market demand is greater than market supply. In case of excess supply, prices will fall and in case of excess demand, prices will increase.