Let the initial price of a good be $ 5. If buyers wish to Purchase 4000 units pe

Question

Let the initial price of a good be $ 5. If buyers wish to Purchase 4000 units per weak at that price while sellers wish to sell 5000 units per week, then price will tend to Increase in the future. firm output will tend to increase in the future. price and output will ten to remain the same for the future. Use this data The following table contains data pertaining to the market for mountain bikes. Use this data to answer questions 8 & 9. The equilibrium price In the market Is: 100 200 300 400. The equilibrium quantity exchanged in the market is: 2000 bikes 3000 bikes 4000 bikes 5000 bikes. If IBM and Compaq computers are substitutes, a decrease in the price of IBM PCs will cause: a decrease In the demand for Compaq computers. an Increase in the demand for IBM computers. an increase in the supply of IBM computers. an increase In the supply of Compaq computers. price will tend to decrease in the future.

Explanation / Answer

Ans 5. At $5, demand = 4000 units and supply =5000 units. It means there is excess supply which causes a decrease in the price level. (All the options are wrong)

Ans 6. Equilibrium prices is attained where demand=supply. at $300, demand = suppply.

Ans 7. Equlibrium quantity = 3000

Ans 8. (A) because now IBM computers are less expensive, they are cheaper than Compaq, so consumers would buy IBM pc.

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