Question

Which of the following accurately explain the statement "People respond to incentives and disincentives" in relation to the demand curve and supply curve for good X? Check all that apply. If the government withdraws subsidies to the producers of good X, they will supply less of that good at any given price. ■ If the government subsidizes the producers of good X, they will supply less of that good at any given price. O A fall in the price of good X will cause a decrease in the quantity demanded of that good and an increase in the quantity supplied of that good OAn increase in the price of good X will cause an decrease the quantity demanded of that good and an increase in the quantity supplied of that good.

Answer 1

Answer : Options A and D are the answer.

When government withdraw the subsidies on producers then the production cost increase for producers. As a result, producers decrease their production level which decrease the market supply at any price level. Therefore, option A is correct.

When price rise then quantity demanded decrease because of inverse relationship between price and quantity demanded. But when price rise then the quantity supplied increase because of positive relationship between price and quantity supplied. Therefore, option D is correct.