Asked by Kevin Rodrigues on May 04, 2024
Verified
(Figure: Demand and Supply of Gasoline) Use Figure: Demand and Supply of Gasoline.Given the equilibrium after a change in supply from S1 to S2:
A) at the old price of $2.50,there will be pressure for the price to fall.
B) the new price will be $2.00.
C) the new quantity will be 600.
D) the price will remain constant.
Old Price
Refers to the price level of a good or service in the past, before any adjustments like inflation, discounts, or changes in market conditions.
- Comprehend the effects of alterations in supply and demand on the equilibrium price and quantity.
Verified Answer
JB
Jesus BritoMay 10, 2024
Final Answer :
A
Explanation :
After the increase in supply, the new equilibrium point is at a lower price level of $2.00 and a higher quantity level of 600. At the old price level of $2.50 there will be excess supply as the quantity supplied is now greater than the quantity demanded, which creates pressure for the price to fall until a new equilibrium is reached. Therefore, option A is correct. Option B and C are incorrect as they provide the new price and quantity levels before confirming the pressure for price adjustment. Option D is incorrect as there has been a shift in supply resulting in a change in equilibrium price and quantity.
Learning Objectives
- Comprehend the effects of alterations in supply and demand on the equilibrium price and quantity.