11) Using the above figure, suppose that roses are a normal good. If incomes dec

Question

11) Using the above figure, suppose that roses are a normal good. If incomes decrease while simultaneously there is an increase in the price of the resources used to produce roses, then A) we cannot tell what will happen to equilibrium quantity B) the quantity will definitely decrease below 10 dozen roses. C) the price will definitely decrease below $25 per dozen roses. D) the price will definitely increase above $25 per dozen roses. Year Price level Nominal 1982 1992 2002 100 150 300 GDP $1,600 $3,000 $6,000

Explanation / Answer

ANSWER:

The correct answer is option b as currently the equilibrium is at 10 roses and sice roses are normal good and if the price of resource increase then price of roses will increase and at the same point people's income is also decreasing , therefore the quantity will fall from 10 roses.

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