What typically happens when prices are set above the equilibrium market price?

When prices are set above the equilibrium market price, a surplus is created. This occurs because the higher price discourages consumers from purchasing as much of the good or service as they would at a lower price. At the same time, producers are incentivized to supply more of the good since they can receive a higher price for it. This mismatch between the quantity supplied (which increases due to the higher price) and the quantity demanded (which decreases) results in excess inventory or a surplus in the market.

Equilibrium is achieved when the quantity supplied equals the quantity demanded, but when the price is raised above this point, the increased supply and decreased demand do not balance out, leading to the accumulation of unsold goods. In this scenario, producers may eventually need to lower prices to clear the surplus, returning the market toward equilibrium.