3. consider the supply and demand graph given below.\na. in this market, what would happen if the price was…

Explanation:

Step1: Recall supply - demand principles

At equilibrium, quantity demanded equals quantity supplied. When price is above equilibrium, there is a surplus; when price is below equilibrium, there is a shortage.

Step2: Analyze when price is $7

The equilibrium price is $5. When price is $7 (above equilibrium), quantity supplied is greater than quantity demanded, resulting in a surplus.

Step3: Analyze when price is $3

When price is $3 (below equilibrium), quantity demanded is greater than quantity supplied, resulting in a shortage.

Step4: Analyze when price is $5

At a price of $5, the market is in equilibrium as quantity demanded equals quantity supplied.

Answer:

a. There would be a surplus. b. There would be a shortage. c. The market would be in equilibrium.