Question

30) In the following question you are asked to determine, other things equal, the effects of a 30 given change in a determinant of demand or supply for product X upon (1) the demand (D) for, or supply (S) of, X; (2) the equilibrium price (P) o/X and (3) the equilibrium quantity (Q) of X rise sharply in the future will A) increase D, decrease P, and increase o. ) decrease S, increase P, and increase O C) increase S, increase P, and increase Q. D) increase D, increase P, and increase Q Co

Answer 1

Demand of X : D

Supply of X: S

Equilibrium Price of X: P

Equilibrium Quantity of X : Q

Consumer Expectations that the sharp rise in the price of X in the future will do what?

Its critical to note the reason for the sharp rise in the price of X to understand this problem further. Also, worht mentioning is the Law of Supply and Demand in Economics wherein it shows the relationship between demand and supply and how this relationship in turn influences the price of goods in question.

Sharp rise is owing to the interplay between demand and supply. If the demand is high and Supply not sufficient to cater to the increased demand, price will shoot up( as we are witnessing here in our example).

Supply and demand keep on rising and falling until the price point of Equilibrium is reached( P).

When demand(D) increases and supply remains the same, The increased demand leads to increased Equilibrium Price( P).

Hence, Option D): Increase D, Increase P, Increase Q is true!