What typically occurs when a shop charges a very low price compared to the market equilibrium?

When a shop charges a very low price compared to the market equilibrium, the result is typically excess demand leading to a shortage. This happens because the low price makes the product more attractive to consumers, increasing their willingness to purchase it. As more consumers rush to buy the product, the quantity demanded exceeds the quantity supplied.

In a competitive market, prices usually adjust to reflect supply and demand dynamics. If the price is set substantially lower than what other competitors charge, it can create a situation where customers flock to the shop, and the shop may not have enough inventory to satisfy all buyers. This mismatch between supply and demand results in a shortage, where not all consumers who want to buy at that price can find the product available.

Other options do not directly relate to the scenario of charging a low price compared to market equilibrium. For example, excess supply would occur if prices were set too high. Price stability typically implies that prices remain unchanged and do not reflect such drastic differences from equilibrium. Increased production might seem like a solution but does not address the immediate outcomes of setting a low price, where demand initially outstrips supply.