Skillsfirst Level 3 Certificate in Introduction to Financial Trading (RQF) - UNIT 1: Principles of financial trading
Skillsfirst Level 3 Certificate in Introduction to Financial Trading (RQF) - UNIT 2: Principles of Financial Planning and Cash Flow in Financial Trading
Skillsfirst Level 3 Certificate in Introduction to Financial Trading (RQF) - UNIT 3: Understanding financial trading techniques

EFFECTS OF BEING AWAY FROM THE EQUILIBRIUM POINT

If the price is set too high, such as at P1, then the quantity produced will be Qs. The quantity demanded will be Od. Since the quantity demanded is less than the quantity supplied there will be an oversupply problem. If the price is too low, then too little will be produced to meet demand at that price. This will cause an undersupply problem. A businesses response to both these problems restore the quantity and the price to the equilibrium. In the case of oversupply, the businesses will soon have too much excess inventory, so they will lower prices to reduce this.

Scroll to Top