Question

What is meant by excess demand? Explain the restoration of equilibrium price in this case

Answer 1

This excess demand of 6 units will increase competition among the buyers; consequently, the buyers will tend to buy output at higher price (due to the competition), which as a result will increase the market price. The market price will continue to rise until it becomes Rs 8, where the equilibrium is restored.

Answer 2

Answer:

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This excess demand of 6 units will increase competition among the buyers; consequently, the buyers will tend to buy output at higher price (due to the competition), which as a result will increase the market price. The market price will continue to rise until it becomes Rs 8, where the equilibrium is restored.

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