Future Business Leader Achievments (FBLA) Economics Practice Exam

What usually results from insufficient demand due to high prices?

1. Surplus of goods

2. Stability in market prices

3. Increased consumer spending

4. Stronger economic growth

The correct answer is: Surplus of goods

Insufficient demand due to high prices typically leads to a surplus of goods in the marketplace. When prices are set too high, consumers may choose to purchase fewer products or seek alternatives, resulting in businesses producing more than is demanded. This excess inventory becomes a surplus because the quantity of goods available in the market exceeds the quantity that consumers are willing to buy at those elevated prices. In a market scenario, when supply outstrips demand, it often forces businesses to reduce prices to sell off excess inventory. This decrease can help restore equilibrium by encouraging consumer purchases, but initially, the situation creates a surplus that reflects the mismatch between what is produced and what is consumed.