O Levels Economics (2281)•2281/11/M/J/22
Explanation
Excess Supply at Price Above Equilibrium Steps:
- Locate the price of $2.50 on the supply and demand graph.
- Determine quantity demanded (QD) at $2.50: 2000 tonnes.
- Determine quantity supplied (QS) at $2.50: 6000 tonnes.
- Calculate disequilibrium: QS - QD = 6000 - 2000 = 4000 tonnes excess supply.
Why D is correct:
- At a price above equilibrium, the law of supply and demand predicts QS > QD, creating a surplus of 4000 tonnes as calculated.
Why the others are wrong:
- A: Incorrect direction; shows shortage, but graph indicates surplus.
- B: Correct direction but understates surplus; difference is 4000, not 2000 tonnes.
- C: Incorrect direction; assumes shortage of 4000 tonnes, but actual disequilibrium is surplus.
Final answer: D
Topic: Price determination
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