If producers of milk try to maintain a price above the equilibrium price then the condition of excess demand will exist.Group of answer choicesTrueFalse

To determine whether the statement is true or false, let's analyze the concepts related to supply, demand, and equilibrium price.

Analysis of the Statement

1. Understanding Equilibrium Price: The equilibrium price is the price at which the quantity of a product supplied equals the quantity demanded. At this price, there is no tendency for it to change unless external factors influence supply or demand.

2. Effects of Setting Prices Above Equilibrium:

   • If producers set the price of milk above the equilibrium price, the quantity supplied will exceed the quantity demanded.
   • When this occurs, there is a surplus of milk in the market, not excess demand.

3. Conclusion: The condition of excess demand refers to a situation where demand exceeds supply, typically occurring when the price is set below the equilibrium price.

Final Answer

The statement is False. Setting the price above the equilibrium price leads to surplus, not excess demand.