In economics, a surplus of a particular good occurs when the quantity supplied exceeds the quantity demanded at a particular price. Let's analyze each of the given statements to determine which one correctly describes what happens in this situation:
1. The market price is above the equilibrium price.
- This statement is accurate because a surplus typically arises when the current market price is higher than the equilibrium price. At this higher price, producers are willing to supply more of the good than consumers are willing to buy, resulting in excess supply.
2. The quantity supplied is greater than the quantity demanded.
- This statement correctly defines a surplus. By definition, a surplus means that the quantity supplied exceeds the quantity demanded at the current market price.
3. The price for the good will have a tendency to rise.
- This statement is incorrect. When there is a surplus, the price tends to decrease rather than increase. Producers are likely to lower their prices to sell the excess supply, moving the market towards the equilibrium price where quantity supplied equals quantity demanded.
4. Both the market price is above the equilibrium price and the quantity supplied is greater than the quantity demanded.
- This statement combines the first and second statements, both of which are true. Therefore, this combined statement accurately describes the condition in the market when there is a surplus.
Given the analysis, the correct answer is:
Both the market price is above the equilibrium price and the quantity supplied is greater than the quantity demanded.
