2 F Dt A B C Quantity 0 Refer to the above diagram which sho

2 F Dt A B C Quantity 0 Refer to the above diagram, which shows demand and supply conditions in the competitive market for product x. If supply is S1 and demand Do. then at any price above 0G a shortage would occur. 0 of represents a price that w ould result in a surplus ofAC O a surplus of GH would occur. OF represents a price that would result in a shortage of AC.

Solution

OF represents a price that would result in a shortage of AC.

Equilibrium price in this situation is G, price below G results in shortage while price above G represents surplus in the market.