Suppose the price of a good is higher than equilibrium price. Explain the changes that will establish equilibrium price.
When price prevailing in the market is higher than equilibrium price, demand will be less than supply, i.e. there is excess supply in the market. Excess supply will force the market price to slide down causing extension of demand and contraction of supply. The process of extension and contraction would continue till the equilibrium between supply and demand is struck. Thus, equilibrium price will be restored through the free play of market forces.
