Suppose that equilibrium price is denoted by p*. At any price greater than p*, there will be ________, and at any price lower than p*, there will be __________

Excess supply, excess demand

The correct answer is Option 1:Excess supply, excess demand

• At any price greater than p* (equilibrium price):

  • The quantity supplied exceeds quantity demanded, leading to excess supply or a surplus.
  • Sellers may have unsold goods, leading to downward pressure on prices.

• At any price lower than p* (equilibrium price):

  • The quantity demanded exceeds quantity supplied, leading to excess demand or a shortage.
  • Buyers compete for the limited supply, pushing prices upward toward equilibrium.