[Allen Farber]

So here's an example of a standard Supply & Demand Relationship for an Individual Supplier:

As a supplier, for $1, I'll produce 1 unit of something. For $2, I'll produce 2 units, for $3, I'll produce 3 units, and so on and so forth up until $10 for 10 units.

At $1, I'll have 10 buyers, at $2, I'll have 9 buyers, at $3, I'll have 8 buyers...all the way up to having 1 buyer at $10.

As you can see, there's an inverse relationship with the equilibrium price being right in the middle: Producing 5 units with 5 buyers buying each of them at $5 per unit. Simple...

But now I'm wondering what would happen if there was a surplus. Ideally I should've made 5 units at $5 each and sold them all to 5 buyers. But let's say I make 6 units, thinking I'll be able to sell all of them for $6 each, but I only end up selling 4 of them to 4 buyers. If I wanted to sell all 6, I would have to sell them at $4 each to reach equilibrium. The problem is if I sell 6 of them for $4 each, I'll make less money than I would selling only 5 of them for $5 each.

So do I reduce the price to $4 so I can sell all 6 of them, making $24? Or do I sell 5 of them at $5 each, making $25, and then sell the remaining one for less money?

Thanks in advance for answers.