Price increase above equilibrium creates surplus Steps:

• At P=$5, Qd=400-20(5)=300; Qs=100+40(5)=300, so Qd=Qs (equilibrium).
• At P=$6, Qd=400-20(6)=280; Qs=100+40(6)=340, so Qs>Qd (surplus).
• Initial state is equilibrium; new state is surplus.
• Change: from equilibrium to surplus.

Why C is correct:

• Price above equilibrium means Qs > Qd, resulting in surplus per the law of supply and demand.

Why the others are wrong:

• A: Price rise creates surplus, not shortage (shortage requires price below equilibrium).
• B: At $5, market is in equilibrium, not shortage.
• D: Price rise moves toward surplus, not shortage.

Final answer: C