A price of $10 per box of chocolates results in:
a. equilibrium in the chocolate market.
b. a surplus of 2,000 boxes of chocolates.
c. a surplus of 4,000 boxes of chocolates.
The correct answer and explanation is:
The correct answer depends on the supply and demand data for the chocolate market, but assuming the context where a price of $10 results in excess supply, the correct choice is:
c. a surplus of 4,000 boxes of chocolates.
Explanation:
In a market, the price determines the quantity of a product that producers are willing to supply and the quantity that consumers are willing to buy. The point where quantity supplied equals quantity demanded is called the equilibrium price. At this price, the market clears with no excess supply or shortage.
If the price is set above the equilibrium price, producers are willing to supply more than consumers want to buy. This creates a surplus, meaning there are more goods available than buyers at that price. Conversely, if the price is below equilibrium, demand exceeds supply, resulting in a shortage.
In this case, the price of $10 is likely above the equilibrium price for boxes of chocolates. At this higher price, suppliers produce more boxes, but buyers purchase fewer due to the higher cost. The surplus is the difference between the quantity supplied and quantity demanded.
Given the options, a surplus of 4,000 boxes suggests that at $10, supply exceeds demand by this amount. This means 4,000 boxes remain unsold if the price remains at $10.
Surpluses put downward pressure on prices as suppliers compete to sell their excess inventory. Over time, the price tends to decrease toward equilibrium, eliminating the surplus and balancing quantity supplied and demanded.
Therefore, a price of $10 does not result in market equilibrium but causes a surplus of 4,000 boxes, indicating an inefficient allocation at that price point. Understanding surplus helps in predicting price adjustments and market behavior.