Question

At $5 a bushel, there is an excess supply of wheat. Is this price above or below the equilibrium price? In two or three sentences, explain your answer.

Answer 1

Answer:

This price is above the equilibrium price due to the fact that when Supply increases the production costs decreases in other words it can be because the price floor whitch is a price that is set above the equilibrium price, it is not allowed to decrease and eventually causes a surplus in products.

Answer 2

This price is above the equilibrium price, the price is too high so the suppliers will produce more than is being bought. When Supply increases the production costs decrease, but because there is a price floor the cost can not decrease which makes a surplus of product.