A producer is at equilibrium point in a market where producer can sell
any quantity at same price. What will the producer do if price of that
commodity increases? Explain the chain effect.

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Solution

Dear Student
If price is higher than its equilibrium price than seller can earn more profit but not for longer run. when price is more than equilibrium price than that market condition is called as excess supply that means there is more stock with the seller and to sell that excess stock seller need to lower the price of the commodity.This is self adjusting process that will bring the price of commodity again to its equilibrium level.

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A producer is at equilibrium point in a market where producer can sell any quantity at same price. What will the producer do if price of that commodity increases? Explain the chain effect.

A producer is at equilibrium point in a market where producer can sell
any quantity at same price. What will the producer do if price of that
commodity increases? Explain the chain effect.