In the graph above, suppose equilibrium is at point D. The price of the good is expected to rise in the future, then equilibrium will A. shift to point A. B. shift to point B. C. shift to point C. D. remain at point D.

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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In the graph above, suppose equilibrium is at point D. The price of the good is expected to rise in the future, then equilibrium will

A. shift to point A.
B. shift to point B.
C. shift to point C.
D. remain at point D.
Price
A
D
B
100
D1
S1
D2
S2
Quantity
Transcribed Image Text:Price A D B 100 D1 S1 D2 S2 Quantity
Expert Solution
Step 1

In the free economy, the equilibrium price and quantity is determined by the forces of demand and supply.

The demand curve is downward sloping line indicating an inverse relationship between the price and quantity demanded, other things being constant.

The supply curve is upward sloping line indicating a positive relationship between price and quantity supplied, other things being constant.

The point where the downward sloping demand curve intersects the upward sloping supply curve is the point of equilibrium.

 

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