Refer to Figure 3.14. At a quantity demanded of 750, there is an excess of what?
Understand the Problem
The question refers to Figure 3.14, showing a supply and demand graph for sunglasses. It asks what exists when the quantity demanded is 750.
Answer
At a quantity demanded of 750, there is an excess supply.
At a quantity demanded of 750, there is an excess supply. According to the graph, when the quantity demanded is 750, the price is $30. At this price, the quantity supplied is about 150.
Answer for screen readers
At a quantity demanded of 750, there is an excess supply. According to the graph, when the quantity demanded is 750, the price is $30. At this price, the quantity supplied is about 150.
More Information
Excess supply, also known as a surplus, occurs when the quantity of a good or service supplied exceeds the quantity demanded at the prevailing market price. This leads to a build-up of unsold inventory, which can then lead to sellers lowering their prices to encourage sales, moving the market towards equilibrium.
Tips
A common mistake is confusing supply and demand, which can lead to misinterpreting the graph. To avoid this, remember that the demand curve slopes downward and the supply curve slopes upward.
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