Surplus from Increased Supply Causes Disequilibrium

Steps:

• Define equilibrium as quantity demanded equaling quantity supplied at market price.
• Identify disequilibrium as surplus (Qs > Qd) or shortage (Qd > Qs) before price adjusts.
• Evaluate options for scenarios creating persistent imbalance where market doesn't clear.
• Choose option showing producers unable to sell all output, indicating surplus.

Why B is correct:

• Increase in supply shifts supply curve right, creating surplus (Qs > Qd) at initial price; even with price fall, if not fully adjusted, some output remains unsold, per law of supply and demand.

Why the others are wrong:

• A: Decrease in demand leads to surplus, but price fall and producers exiting adjust supply to restore equilibrium.
• C: Decrease in supply creates shortage (Qd > Qs), but price rise allocates to willing buyers, moving toward equilibrium.
• D: Increase in demand creates shortage, but price rise rations to higher-value users, achieving equilibrium.

Final answer: B