The market for ping pong balls is initially in equilibrium at a price of $10.00 and...

The market for ping pong balls is initially in equilibrium at a price of $10.00 and quantity of 115. Then supply increases from S1 to S2 and a new equilibrium is established at a price of $8.00 and quantity of 150.

The change in revenue attributable to the “price effect” is

Group of answer choices

A.An increase of $280

B.A decrease of $280

C.A decrease of $230

D.An increase of $230

Expert Solution

We have to calculate revenue as a given critiria of price effect, so the latest price as a result of supply change is 8.

multiplying the initial quantity by price we get 115*8=920 and multiplying the new quatity by price we get 150*8=1200 by subtracting i.e 920 - 1200= -280. though it is negetive the answer is b.

Rahul Sunny answered 2 years ago

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