Question

A. (x). (y) and (2) C. (x) and (z) only E. (X) only B. (x) and (y) only D. (y) and (z) only Exhibit 3 Price 12. Use Exhibit 3. If the actual price was $20, then a A surplus of 600 units would exist, price would tend to fall and the quantity sold would increase as the market moves to equilibrium. B surplus of 250 units would exist, price would tend to fall and the quantity sold would decrease as the market moves to equilibrium shortage of 250 units would exist, price would tend to rise and the quantity sold would increase as the market moves to equilibrium D shortage of 250 units would exist, price would tend to rise and the quantity sold would decrease as the market moves to equilibrium shortage of 600 units would exist. price would tend to rise and the quantity sold would decrease as the market moves to equilibrium. $24 Quantity Demanded 400 500 600 Quantity Supplied 650 500 350 $22 $20 13. Use Exhibit 3. Which of the following statements is (are) correct? (x) A decrease in demand would cause a shortage at the original price and that would cause the equilibrium price to fall below $22 and the equilibrium quantity to fall below 500 units ty) An increase in supply would cause a surplus at the price of $22 and the quantity sold would increase as the price moved to equilibrium such that the new equilibrium quantity is more than 500 units (Z) both demand increases and supply decreases, then the market would always end up at an equilibrium price greater than $22. A x ), (y) and (2) B. (x) and (y) only C. (x) and (z) only D. (y) and (z) only E. (y) only 14. Which chain of events is an expected occurrence in the market and, in addition, occurs in the correct order? (x) Supply increases, price decreases, quantity supplied increases (y) Supply decreases, price increases, quantity demanded decreases (2) Demand decreases, price decreases quantity supplied decreases A. (x). (y) and (2) B. (x) and (y) only C. (x) and (z) only D. (y) and (2) only E. (z) only

Answer 1

12. Option D. As the price is lesser than equilibrium price, then the demand increases which increases price and hence reduces the quantity demanded

13. Option D.

14. Option A. Supply is directly related to price, whereas demand is inversely related to price