This logic, which is illustrated in Figure 2-8, justifies the conclusion that the only equilibrium price is the price in which the quantity supplied equals the quantity demanded. Any other price will tend to rise in a shortage, or fall in a surplus, until supply and demand are balanced. In Figure 2-8, a surplus arises at any price above the equilibrium price p*, because the quantity supplied qs is larger than the quantity demanded qd. The effect of the surplus – leading to sellers with excess inventory – induces price cutting which is.
