if in the graph, it is assumed that the price is initially P1, it can be deduced that price will

  • A fall because there is a surplus
  • B remain constant because it is the equilibrium price
  • C rise because there is a shortage
  • D double
jamb 1992economics

The correct answer is A. fall because there is a surplus

At price P1, the quantity supplied (from the supply curve S) is greater than the quantity demanded (from the demand curve D).

This situation creates a surplus in the market.

When there is a surplus, the price tends to fall to clear the market.

This is because sellers will lower their prices to sell their excess goods.

Therefore, the correct answer is A. fall because there is a surplus

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