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Unformatted text preview: A surplus occurs when the quantity supplied is greater than the quantity demanded. 2.d.3. According to the graph above, the market equilibrium is when the price is $10 and the quantity demanded is 3. However, at a price of $14, the quantity of pizza supplied is 4 and the quantity of pizza demanded is only 2. This means that the suppliers are willing to supply more pizza and the buyers are willing to buy less pizza because the prices are higher. This causes a surplus of 2. 2.d.4. When surpluses occur, and there are no price ceilings or floors, suppliers lower prices (from $14 to $10), causing the quantity demanded to move up on the demand curve (from 2 to 3), and quantity supplied to move down on the supply curve (from 4 to 3), until price and quantity is back at market equilibrium....
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This note was uploaded on 03/09/2010 for the course ECON 303 taught by Professor Cheng during the Spring '07 term at USC.
- Spring '07
- Market Equilibrium