answersLogoWhite

0

When the price is above equilibrium, there is a surplus because supply is greater than demand. The price of the good will naturally decrease back to its equilibrium price where demand and suppy interesect, thus eliminating the surplus.

User Avatar

Wiki User

13y ago

What else can I help you with?

Related Questions

Where is the consumer surplus located on a graph depicting market equilibrium?

Consumer surplus is located above the market price and below the demand curve on a graph depicting market equilibrium.


When a surplus of a product will arise when price is above equilibrium or below equilibrium?

above equilibrium


How can one calculate surplus on a graph?

To calculate surplus on a graph, find the equilibrium point where supply and demand intersect. The surplus is the area above the equilibrium price and below the demand curve. Subtract the equilibrium price from the highest price on the demand curve to find the surplus.


Where is consumer surplus located on a monopoly graph?

Consumer surplus is located above the price and below the demand curve on a monopoly graph.


How can one determine producer surplus at equilibrium?

To determine producer surplus at equilibrium, calculate the area above the supply curve and below the equilibrium price. This represents the difference between the price producers are willing to accept and the price they actually receive, indicating their surplus.


How can one determine the producer and consumer surplus in a market?

To determine producer and consumer surplus in a market, you can calculate the difference between the price at which a good is sold and the price at which producers are willing to sell (producer surplus) or the price at which consumers are willing to buy (consumer surplus). Producer surplus is the area above the supply curve and below the market price, while consumer surplus is the area below the demand curve and above the market price.


What will happen to consumer and producer surplus when a price floor is eliminated?

If the price floor was set below the equilibrium price, then the removal of this price floor would have no effect on producer and consumer surplus. If the price floor was set above the equilibrium price for that product, then prices with shift down again to the equilibrium price. Consumers would want to buy more, and producers would want to sell more, until they reach the equilibrium price and quantity. In other words all surpluses of deficits would eventually disappear.


True or False If a local Christmas tree farmer is earning a producer surplus on each Christmas tree he sells then his customers cannot enjoy any consumer surplus on the Christmas trees they buy?

False. It depends on the price consumers are willing to pay for the producer's Christmas tree. For example, if the producer is willing to sell his tree at $3 but the market price is $5, then the surplus for the producer is $2. Say, a consumer is willing to buy the tree at $15, then the consumer surplus us $10. Remember that the consumer surplus is the are under the demand curve and above the horizontal line passing through the equilibrium price. As long as this area exists, then it is possible for consumers to enjoy a consumer surplus.


What can offset consumer surplus generated by lower prices?

Consumer surplus generated by lower prices can be offset by demand of product. The above answer overlooks the obvious answer, which is that the increase in the price of a product(s ) will decrease consumer surplus. This assumes of course that there is no shift in demand.


How can one calculate producer surplus at equilibrium?

To calculate producer surplus at equilibrium, subtract the minimum price that producers are willing to accept from the market price. This will give you the area above the supply curve and below the market price, representing the producer surplus.


How can one determine the total consumer surplus in a market"?

To determine the total consumer surplus in a market, you can calculate the difference between what consumers are willing to pay for a product and what they actually pay. This can be done by finding the area under the demand curve and above the market price. The total consumer surplus is the sum of the individual consumer surpluses across all consumers in the market.


How can one determine consumer surplus in a market?

Consumer surplus in a market can be determined by calculating the difference between what consumers are willing to pay for a good or service and what they actually pay. This can be done by finding the area under the demand curve and above the market price. The larger the consumer surplus, the more value consumers receive from the transaction.