When there is an excess supply for a good, there is s: A. upward pressure on pri
ID: 1136186 • Letter: W
Question
When there is an excess supply for a good, there is
s:
A.
upward pressure on price because firms accumulate unwanted inventories.
B.
downward pressure on price because firms accumulate unwanted inventories.
C.
downward pressure on price because firms hold out for the best price they can get.
D.
upward pressure on price because firms hold out for the best price they can get.
An increase in the price of wheat, an important ingredient in the production of bread, combined with an increase in the number of people consuming bread, will result in which of the following changes in the bread market?
#Both the equilibrium price and quantity will increase.
#Equilibrium quantity will decrease, but equilibrium price may decrease, increase, or stay the same.
#Both the equilibrium price and quantity will decrease.
#Equilibrium price will increase, but equilibrium quantity may decrease, increase, or stay the same.
.
3. .
the equation of the demand function is Qd = 35-3p, and the equation of the supply function is Qs = 5+2p
a. By how much does quantity demanded change when the price increases by $1
NONOTE: INDICATE THE CORRECT MAGNITUDE AND SIGN. FOR EXAMPLE AN INCREASE OF 2 IS 2, A DECREASE OF 2 IS -2
4…The negative slope of the demand curve is due to
A.
more consumers buying the good as the price falls.
B.
greater consumption per person as the price falls.
C.
both (A) and (B)
D.
neither (A) nor (B)
When there is an excess supply for a good, there is
s:
A.
upward pressure on price because firms accumulate unwanted inventories.
B.
downward pressure on price because firms accumulate unwanted inventories.
C.
downward pressure on price because firms hold out for the best price they can get.
D.
upward pressure on price because firms hold out for the best price they can get.
Explanation / Answer
Answer : 1) The correct option is B.
If a firm has excess supply for a commodity then to reduce this excess supply the firm decrease the price level. As a result, the demand for that good increase because of negative relationship between price and quantity demanded. Therefore, excess supply create a pressure to decrease the price level.
2) The correct option is A.
Because of increase in ingredient price level of bread the bread making cost increases. As a result, the price of bread rise. On other side, increasing bread consuming people number increases the quantity demanded for bread. To meet this excess demand for bread the quantity supply increase. Therefore, option A brings the correct statement.
3) a) Given,
Demand : Qd = 35 - 3P
Supply : Qs = 5 + 2P
At market equilibrium condition, Qunantity demand = Quantity supply.
=> 35 - 3P = 5 + 2P
=> 35 - 5 = 2P + 3P
=> 30 = 5P
=> P = 30/5
=> P = 6
Therefore, equilibrium price is P = $6.
At this equilibrium price level the quantity demand is,
Qd1 = 35 - (3 × 6)
=> Qd1 = 17
Now, if price rise by $1 and become P = $7 then the quantity demand is,
Qd2 = 35 - (3 × 7)
=> Qd2 = 14
Change in quantity demanded = Qd2 - Qd1 = 14 - 17
=> Change in quantity demanded = - 3
Therefore, from the above calculations it is clear that if the price level is increased by $1 then the quantity demanded is decreased by 3.
4) The correct option is C.
Because of negative relationship between price and quantity demanded for a negatively sloped demand curve if price fall then quantity demanded increase. For both option A and option B consumer's consumption increases as price level falls which fulfils the criteria of negatively sloped demand curve. Hence both options A and B are correct.
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