Question

Suppose that producers are charging a price that is higher than the equilibrium price. Will this create a surplus or shortage of goods? In two or three sentences, explain your answer.

Answer 1

This will create a surplus of the product. Because with the price being higher there won't be as many purchases as there would be if there was a cheaper alternative.

Answer 2

In theory, it should create a surplus. People don't normally pay more for an item than it is worth, however there are always exceptions.