A local grocery store orders 200 cases of Pepsi each week and sells them at a price of $6

Economics Dec 23, 2020

A local grocery store orders 200 cases of Pepsi each week and sells them at a price of $6.00 per case. At the end of the first week, they have only sold 160 cases. What economic situation is the grocery store facing and what will have to happen to the price in order for equilibrium to be attained?

a. surplus; price will rise,

b. surplus; price will fall,

c. shortage; price will rise,

d. shortage; price will fall,

e. nothing since the market is in equilibrium.

Expert Solution

The answer is b. surplus; the price will fall.

The quantity demanded for Pepsi (160 cases) is less than the quantity supplied (200 cases). When the quantity supplied exceeds the quantity demanded, there is a surplus of 4040 cases. To clear the surplus, the firm will have to drop its price, all else equal.

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