Asked by DELINA FILLI on Jun 06, 2024
Verified
Consider the market for wheat that is initially in equilibrium.In which of the following situations will the equilibrium price of wheat increase and the change in the equilibrium quantity of wheat be indeterminate?
A) If supply and demand both decline
B) If supply and demand both rise
C) If supply declines and demand rises
D) If supply rises and demand declines
E) If supply remains constant and demand rises
Equilibrium Price
The price at which supply and demand for a product or service balance, leading to an stable market condition.
Supply Declines
A situation where the quantity of a good or service that producers are willing to sell at a given price decreases.
Demand Rises
An increase in the quantity of a product or service that consumers are willing and able to purchase at a given price level.
- Acknowledge the principle of market equalization and the effect of supply and demand dynamics on the equilibrium price and volume.
- Inspect market conditions to determine how changes in supply and demand influence the directional transformation of equilibrium price and quantity.
Verified Answer
JL
JANNO LAMPKINJun 11, 2024
Final Answer :
C
Explanation :
C) If supply declines and demand rises, the equilibrium price of wheat will increase because the decrease in supply would push prices up, and the increase in demand would further push prices up. The change in the equilibrium quantity is indeterminate because the decrease in quantity due to lower supply and the increase in quantity due to higher demand work in opposite directions, making the net effect on quantity unclear without more information.
Learning Objectives
- Acknowledge the principle of market equalization and the effect of supply and demand dynamics on the equilibrium price and volume.
- Inspect market conditions to determine how changes in supply and demand influence the directional transformation of equilibrium price and quantity.