Asked by Haley Adams on Apr 25, 2024
Refer to Figure 4.2. The market is initially in equilibrium at the intersection of S2 and D, and supply shifts from S2 to S1. Which of the following statements is true?
A) Price will still serve as a rationing device causing quantity demanded to rise from 8 to 11 soft pretzels.
B) There is no need for price to serve as a rationing device in this case because the new equilibrium quantity is lower than the original equilibrium quantity.
C) Price will still serve as a rationing device causing quantity supplied to fall from 8 to 4 soft pretzels.
D) The market cannot move to a new equilibrium until there is also a change in supply.
Price
The fiscal amount deemed necessary, expected, or expended in purchasing something.
Rationing Device
A method or system used to allocate scarce goods, services, or resources among competing demands.
Equilibrium
A state in a market where supply equals demand, and there is no tendency for change in the price or quantity.
- Become familiar with the effect that governmental price controls have on maintaining market balance.
Learning Objectives
- Become familiar with the effect that governmental price controls have on maintaining market balance.