What occurs when the market price is set above the equilibrium price?

When the market price is set above the equilibrium price, a surplus occurs. This situation arises because the higher price discourages consumers from purchasing the good or service, leading to a decrease in quantity demanded. Simultaneously, producers are attracted to the higher price and increase the quantity supplied. As a result, the quantity supplied exceeds the quantity demanded, creating an excess of goods in the market.

In contrast, when the market price is at equilibrium, the quantity demanded equals the quantity supplied, leading to a balanced market without surplus or shortage. Options that suggest a shortage or increased demand do not apply in this scenario, as a surplus specifically results from prices being too high relative to demand.