ECONOMICS
SUPPLY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Businesses are unwilling to reduce the inventory.
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The price of a product falls below the equilibrium price.
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Consumers are unwilling to pay for the product.
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The price of a product rises above the equilibrium price.
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Detailed explanation-1: -A shortage can occur if the demand for a product increases but the supply doesn’t-or if demand increases faster than production can ramp up.
Detailed explanation-2: -Just as a price above the equilibrium price will cause a surplus, a price below equilibrium will cause a shortage. A shortage is the amount by which the quantity demanded exceeds the quantity supplied at the current price.
Detailed explanation-3: -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-4: -If a surplus exist, price must fall in order to entice additional quantity demanded and reduce quantity supplied until the surplus is eliminated. If a shortage exists, price must rise in order to entice additional supply and reduce quantity demanded until the shortage is eliminated.