If the prevailing market price is above the equilibrium price, explain its chain of effects.

If the prevailing market price is above the equilibrium price, there will be excess supply. Producers are not able to sell all they want to sell, resulting in competition among the sellers. Price starts falling. As a result, demand starts rising and supply starts falling. These changes continue till the equilibrium is reached.

Detailed Answer:

If the price prevailing in the market is above the equilibrium price then the firms will supply more quantity of a commodity and the consumers will demand less quantity of the commodity. Thus, it will distort the situation of equilibrium in the market. There will be a situation of excess supply. In such a case, competition among the sellers will pull down the market price to equilibrium price, by the way of expansion in demand and contraction in supply.