The price and quantity data for toasters is given in the...

The price and quantity data for toasters is given in the table below.
What is the excess supply or demand when the price is (a) $£ 12$ and (b) $£ 20 ?$ Describe the price movements induced by positions (a) and (b).

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Key Concepts

Excess Supply and Excess Demand

Excess supply occurs when the quantity supplied exceeds the quantity demanded at a given price, leading to a surplus that typically puts downward pressure on prices. Conversely, excess demand—often referred to as a shortage—arises when the quantity demanded exceeds the quantity supplied, creating upward pressure on prices as consumers compete for a limited quantity.

Market Equilibrium

Market equilibrium is the state where the quantity demanded equals the quantity supplied at a particular price level. At this point, there is no inherent pressure for price change, because the market forces of supply and demand are balanced.

Price Mechanism

The price mechanism is the process by which prices adjust in response to excess supply or excess demand. When there is a surplus, prices tend to fall, encouraging more consumption and less production, whereas during a shortage, prices rise, which dampens demand and boosts production until equilibrium is restored.

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