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Which of the following statements is (are) correct? x) If the supply of a product decreases or demand for a product increases, then a shortage exists at the initial equilibrium price and the price would rise to a new equilibrium price
Which of the following statements is (are) correct?
x) If the supply of a product decreases or demand for a product increases, then a shortage exists at the initial equilibrium price and the price would rise to a new equilibrium price.
y) If the demand for a product decreases or the supply of a product increases, the market would experience a surplus at the initial equilibrium price and the price would fall to a new equilibrium price.
z) If the demand for a product decreases, then a surplus exists at the initial equilibrium price and the quantity would rise to a new equilibrium quantity.
a) (x), (y) and (z)
b) (x) and (y) only
c) (x) and (z) only
d) (y) and (z) only
e) (y) only
Expert Solution
b) (x) and (y) only
When demand decreases and supply increases, then it generally shows the downward pressure on prices. It also reflects surplus in quantities of output. Whereas a decrease in supply and increase in demand put upward pressure on prices and shortage in quantities.
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