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.
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.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
In the graph above, suppose equilibrium is at point D. The
A. shift to point A.
B. shift to point B.
C. shift to point C.
D. remain at point D.
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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