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If, at the prevailing price, the quantity demanded of a good exceeds the quantity supplied, the resulting pressure on the market price will be:
Aupward, until equilibrium is restored
Bdownward, until equilibrium is restored
Cabsent, since the market is already cleared
Dfirst downward and then permanently flat
Answer & Solution
Correct answer: A. upward, until equilibrium is restored
1. Quantity demanded above quantity supplied means excess demand (a shortage).
2. Competing buyers bid the price up.
3. The price rises until quantity demanded again equals quantity supplied.
4. So the pressure on price is upward.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 2 Unit III "Supply", p.11_
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