ECONOMICS
SCARCITY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Prices go up.
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Prices go down.
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Prices stay the same.
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None of the above
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Detailed explanation-1: -As you can see, an increase in demand causes the equilibrium price to rise. On the other hand, a decrease in demand causes the equilibrium price to fall. An increase in supply causes the equilibrium price to fall, while a decrease in supply causes the equilibrium price to rise.
Detailed explanation-2: -An increase in demand and a decrease in supply will cause an increase in equilibrium price, but the effect on equilibrium quantity cannot be detennined. 1. For any quantity, consumers now place a higher value on the good, and producers must have a higher price in order to supply the good; therefore, price will increase.
Detailed explanation-3: -When supply decreases, the price of the good increases. Inversely, when the supply of the good increases, the price falls. A similar relationship exists between price and demand. When the demand for the good increases, the price of the good also increases.