Figure 1.64 shows supply and demand for a product.

(a) What is the equilibrium price for this product? At this price, what quantity is produced?

(b) Choose a price above the equilibrium price—for example, p = 12. At this price, how many items are suppliers willing to produce? How many items do consumers want to buy? Use your answers to these questions to explain why, if prices are above the equilibrium price, the market tends to push prices lower (toward the equilibrium).

(c) Now choose a price below the equilibrium price— for example, p = 8. At this price, how many items are suppliers willing to produce? How many items do consumers want to buy? Use your answers to these questions to explain why, if prices are below the equilibrium price, the market tends to push prices higher (toward the equilibrium).

Figure 1.64

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p (price per unit) 28 24 20 16 12 8 4 1000 2000 3000 4000 5000 Supply Demand q (quantity)