If a beef market is in equilibrium at $4.00 per kg, an increase in price to$6.00 per kg may cause

Analyze the question The beef market is in equilibrium at $4.00 per kg, so quantity demanded equals quantity supplied. The price then rises to$6.00, which is above the equilibrium price. We need to find what this causes.

Concept

• When price rises above equilibrium, consumers buy less (the law of demand: quantity demanded falls).
• Producers supply more (the law of supply: quantity supplied rises).
• So quantity supplied is greater than quantity demanded. This excess supply is called a surplus (or glut).
• A shortage happens when price is below equilibrium, since demand then exceeds supply.

Step-by-step solution

1. Equilibrium price = $4.00, where Qd = Qs.
2. New price = $6.00, which is above equilibrium.
3. At $6.00, Qd falls and Qs rises, so Qs > Qd.
4. The result is a surplus in the market.
5. Check the other options: • B (shortage): wrong, because a shortage occurs when price falls below equilibrium. • C (black market): this arises when a price ceiling (maximum price) is imposed and there is a shortage. A higher price doesn't cause it. • D (rationing): this is also a response to shortages, which don't occur here.

Answer: A. surplus in the market

Exam tip Remember: "Price Above = Abundance (surplus); Price Below = Brief supply (shortage)." Whenever a question mentions a price above equilibrium, think surplus. A price below equilibrium means shortage, and black markets and rationing usually go with price controls and shortages.