Which of the following best describes the reason why price will increase when demand increases?

Choose 1 answer:
(A) At the old equilibrium quantity, the price people are willing to pay for that quantity has decreased.
(B) At the old equilibrium price, the quantity supplied will exceed the quantity demanded, which will cause a surplus.
(c) At the old equilibrium price, the quantity demanded will exceed the quantity supplied, which will cause a shortage.
(D) Until price changes in response to a demand increase, the quantity demanded will be less than quantity supplied.
(E) Demand will increase in response to the increase in supply which drives down the price of the good.

Question

Which of the following best describes the reason why price will increase when demand increases?

Choose 1 answer:
(A) At the old equilibrium quantity, the price people are willing to pay for that quantity has decreased.
(B) At the old equilibrium price, the quantity supplied will exceed the quantity demanded, which will cause a surplus.
(c) At the old equilibrium price, the quantity demanded will exceed the quantity supplied, which will cause a shortage.
(D) Until price changes in response to a demand increase, the quantity demanded will be less than quantity supplied.
(E) Demand will increase in response to the increase in supply which drives down the price of the good.

Accepted Answer

∻Solution∻ ‖ a ⋮ Equilibrium Price: The equilibrium price is the price at which the quantity demanded equals the quantity supplied. When demand increases, the equilibrium price will also increase if the supply remains constant. ‖ ‖ b ⋮ Shortage Creation: At the old equilibrium price, the quantity demanded will exceed the quantity supplied, creating a shortage. This shortage puts upward pressure on the price. ‖ ‖ c ⋮ Market Adjustment: To eliminate the shortage, the price will increase until a new equilibrium is reached where the quantity demanded equals the quantity supplied. ‖ ∻Answer∻ ⚹ (C) At the old equilibrium price, the quantity demanded will exceed the quantity supplied, which will cause a shortage. ⚹ ∻Key Concept∻ ⚹ Shortage ⚹ ∻Explanation∻ ⚹ When demand increases, the old equilibrium price is no longer sufficient to balance the quantity demanded and supplied, leading to a shortage. This shortage causes the price to rise until a new equilibrium is established. ⚹◊What effect does an increase in demand have on the equilibrium price in a market according to the law of demand in Microeconomics⍭ Generate me a similar question◊

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