Refer to the information provided in Table 3.2 below to answer the questions tha
ID: 1142809 • Letter: R
Question
Refer to the information provided in Table 3.2 below to answer the questions that follow. T able 32 Quantity Demanded Price per Cheeseburger (Cheeseburgers per Month)(Cheeseburgers per Month) $5 Quantity Supplied 1,500 1,200 900 600 300 500 700 900 1,100 1,300 Refer to Table 3.2. If the price per cheeseburger is $8, the price will Select one O a. remain constant because the market is in equilibrium b. increase because there is an excess supply in the market. O c. decrease because there is an excess supply in the market. O d, decrease because there is an excess demand in the market.Explanation / Answer
Answer
The correct answer is (c) Decrease because there is excess supply
When Price of cheeseburger = $8 , quantity supplied = 1100 and quantity demand = 600. Hence quantity supplied is greater than quantity demand and when quantity supplied is greater than quantity demandn they we have excess supply and hence in this case when Price = $8 We have excess supply of Cheeseburger. In the free market, market reaches its equilibrium. Hence in order for market to be in equilibrium Quantity supplied should decrease or quantity demand should increase. According to Law of demand If Price of good decreases then quantity demanded increases and according to law of supply if price of good decreases then quantity supplied decreases. Hence If price decreases quantity supplied decreases and quantity demand increases and hence excess supply reduced and finally gets removed when Market reaches equilibrium.
Hence, The correct answer is (c) Decreases because there is excess supply
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