A car dealer who does not have enough customers to buy the dealer's current supply of new cars at the posted price is facing which market condition?

• A. Perfectly inelastic demand (quantity demanded does not change when price changes)
• B. A shortage (quantity demanded exceeds quantity supplied at the current price)
• C. Market equilibrium (quantity demanded equals quantity supplied at the current price)
• D. A surplus (quantity supplied exceeds quantity demanded at the current price)

Answer: (D)

Verified step by step guidance

1. Identify the key elements of the problem: the dealer has more cars (supply) than customers willing to buy at the posted price (demand).
2. Recall the definitions of market conditions: a surplus occurs when quantity supplied exceeds quantity demanded at the current price, while a shortage is the opposite.
3. Analyze the situation: since the dealer cannot sell all cars at the current price, it means there are more cars available than buyers, indicating quantity supplied > quantity demanded.
4. Match this condition to the correct market term: quantity supplied exceeding quantity demanded at the current price is called a surplus.
5. Conclude that the dealer is facing a surplus, not a shortage, perfectly inelastic demand, or market equilibrium.