Question

Please answer

D Question 12 2.6 pts Consider the market for baseball bats below (and assume it can be analyzed in our typical supply/demand framework) SPrice (P) Quantity (a) If the price of ash (the kind of wood used to make baseball bats) increases, the market equilibrium price of bats will increase and the equilibrium quantity will decrease. You should think about what this would look like on the graph above (i.e., with appropriate shift (or shifts). Suppose an analyst for "Baseball World" argues that because the price of bats has risen, people will buy fewer units, and this will cause the equilibrium price to decrease again. This analyst is incorrect because actually "people buying fewer" will make the price rise even further correct because otherwise there would be a surplus in the market. correct because otherwise there would be a shortage in the market. O incorrect because people buying fewer is a movement along the demand curve (not a leftward shift) in this case because buyers are reacting to the increase in price. correct because whenever people buy fewer units, the price will subsequently decrease.

Answer 1

Answer to the MCQ is (D).

Explanation-

If the price of Ash(an input for producing baseball bats) increases, then supply curve of baseball shifts upwards. As a result, equilibrium price increases and equilibrium quantity decreases.

The analysis given in the question is incorrect because when equilibrium price increases then there is an upward movement along the demand curve and at the new equilibrium there won't be any shortage or surplus so price will not come down further.