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) Price instantly adjusts to an increase in demand.

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) Price instantly adjusts to an increase in demand.

Accepted Answer

∻Solution by Steps∻ ‖ step 1 ⋮ To understand the relationship between price and demand, we refer to the law of demand, which states that, ceteris paribus, when the price of a good falls, the quantity demanded will increase, and when the price rises, the quantity demanded will decrease. ‖ ‖ step 2 ⋮ When demand increases, at the old equilibrium price, the quantity demanded will exceed the quantity supplied. This creates a shortage in the market. ‖ ‖ step 3 ⋮ Due to the shortage, consumers are willing to pay more to obtain the product, and producers are motivated to increase the price to balance the quantity supplied with the quantity demanded, leading to a new equilibrium. ‖ ∻Answer∻ ***C*** ∻Key Concept∻ ⚹Shortage and Market Equilibrium⚹ ∻Explanation∻ ⚹When demand increases, a shortage occurs at the old equilibrium price because the quantity demanded exceeds the quantity supplied, leading to an increase in price to reach a new equilibrium.⚹◊What is the relationship between price and demand according to the information provided in the OCR model⍭ Generate me a similar question◊

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