Question

if the price prevailing in the market above the equiliibrium price why there is price fall, quantity demand rises, quantity supplied falls. explain?

Answer 1

If the price prevailing in the market is above the equilibrium price it means that market supply is more than the market demand, so there is situation of excess supply. This excess supply will increase competition among the sellers; consequently, they will reduce the price in order to sell more of their output. The fall in price will continue until it reaches equilibrium price, where market demand equals market supply. At equilibrium price, quantity demanded rises because of reduction in the price(as per law of demand ) and quantity supplied falls because there is reduction in price(as per law of supply).