Question

If the price of a product is above equilibrium, what forces it down ? ( Provide illustrations)

Answer 1

Equilibrium price or market clearing price is a price where quantity demanded is exactly equal to the quantity supplied in the market. At this price, there will be no excess or shortage of goods in the market. In a free market, constant interaction of buyers and sellers of goods leads to equilibrium price in the market that is acceptable to both buyers and sellers and market is cleared.
If price of a product is more than its market equilibrium price, there will be surplus of that product. Inventory will start building up and sellers of the product will be forced to reduce the price to clear the inventory. Decrease in price will lead to an increase in its demand. This price reduction will continue until price reaches to the equilibrium price, at which point there will be no surplus of the product. Quantity demanded by buyers will equal quantity supplied by the sellers and there will be no reason for the sellers to reduce the price further.

Following table shows quantity demanded and quantity supplied for a brand of ice creams at different prices.

Price	Quantity demanded	Quantity supplied
60	200	1800
	400	1600
	600	1400
30	800	1200
20	1000	1000
10	1200	800

It can be seen that equilibrium price for the ice creams is 20 where quantity demanded and supplied are equal at 1000 units. Suppose, price is at any point above 20 - say - 60 - there will be surplus and sellers will be forced to reduce price to increase the demand. the price will continue to fall until it reaches 20 where demand and supply will equate.