In the context of market equilibrium, what typically occurs when the quantity demanded exceeds the quantity supplied?

• A. A surplus develops in the market.
• B. The market price falls below equilibrium.
• C. The quantity supplied increases above the quantity demanded.
• D. A shortage develops in the market.

Answer: (D)

Verified step by step guidance

1. Understand the concept of market equilibrium, which occurs when the quantity demanded equals the quantity supplied at a certain price.
2. Recognize that when quantity demanded exceeds quantity supplied, there is more demand than what producers are willing or able to supply at the current price.
3. Identify that this imbalance leads to a shortage, meaning consumers want to buy more than is available in the market.
4. Know that a shortage typically puts upward pressure on the market price, as buyers compete to obtain the limited goods.
5. Conclude that the market price will tend to rise until quantity demanded decreases and quantity supplied increases, moving the market back toward equilibrium.