A price set above equilibrium price creates a shortage.
True or False
I'll be glad to check your answer.
it is true?
True. A price set above the equilibrium price creates a shortage. To understand why, we need to understand the concept of equilibrium price and quantity in the context of supply and demand.
In a market, the equilibrium price is determined by the intersection of the demand and supply curves. At this price, the quantity demanded by consumers is exactly equal to the quantity supplied by producers, resulting in a balanced market where there are no shortages or surpluses.
However, if the price is set above the equilibrium price, the quantity supplied by producers will exceed the quantity demanded by consumers. In other words, at a higher price, fewer consumers are willing and able to purchase the product, while producers are willing to supply more. This imbalance between supply and demand creates a shortage, where the quantity demanded exceeds the quantity supplied.