Question

In: Economics

40. Assume there is a decrease in demand (only). Which of the following is correct? Group...

40. Assume there is a decrease in demand (only). Which of the following is correct?

Group of answer choices

The equilibrium price will decrease, and the equilibrium quantity will increase.

The equilibrium price will increase, and the equilibrium quantity will decrease.

The equilibrium price will decrease, and the equilibrium quantity will decrease.

The equilibrium price will increase, and the equilibrium quantity will increase.

41. Which of the following will cause a decrease in the supply for good Z (a normal good)?

Group of answer choices

an increase in productivity

an increase in the price of a substitute in production

an increase in the number of firms

an expectation by firms of a lower price

42. Assume there is an decrease in supply (only). Which of the following is correct?

Group of answer choices

The equilibrium price will increase, and the equilibrium quantity will decrease.

The equilibrium price will decrease, and the equilibrium quantity will increase.

The equilibrium price will increase, and the equilibrium quantity will increase.

The equilibrium price will decrease, and the equilibrium quantity will decrease.

Solutions

Expert Solution

41.

From the question when there is decrease in supply, it will be done by other than the price factors

the factors can be

Productivity

Taxes and subsidies

Presence of technology in the market

Expectation by the suppliers etc

So when there is decrease in supply it means the supply curve shift will shift leftwards

When there is increase in the productivity the supply will increase

When the expectation of firms are low then supply will be increase today

The number of firms will not affect the supply

But if there will be more production of substitute then there will be decrease in supply of good z

So the answer here is option B

42.


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