Price Above Its Equilibrium Creates a Surplus

1
Price Above Its Equilibrium Creates a Surplus
Chain of Causation

• Suppose the current price is 90 per game
• (i.e., above equilibrium price).
• What would this create?
• How will the market respond?

The Market for Doom X
Price per game
Surplus
Supply
QS 70 million games
QD 20 million games

• QS gt QD
• Creates a surplus
• of 50 million games

• Surpluses signal that the price (90) is too
  high!!!
• There will be downward pressure on price
• (until P 60 per game)

Demand
Quantity (millions of games)