Question

Supply describes how much of something producers:
A. are willing and able to offer for sale under certain circumstances.
B. want to buy under certain circumstances, although they may not be able to.
C. are willing and able to buy under certain circumstances.

Consider a market that is in equilibrium. If it experiences a decrease in supply, what will happen?

A. The supply curve will shift to the left and the equilibrium price and quantity will rise.

B. The supply curve will shift to the right and the equilibrium price and quantity will fall.

C. The supply curve will shift to the left and the equilibrium price will increase and the equilibrium quantity will decrease.

Considering the concept of cross-price elasticity, when two goods are complements:

A. a decrease in the price of one will cause a decrease in the quantity demanded of the other.
B. an increase in the price of one will cause a decrease in the quantity demanded of the other.
C. None of these is true.

Answer 1

Supply describes how much of something producers:

Ans. (A) are willing and able to offer for sale under certain circumstances

Consider a market that is in equilibrium. If it experiences a decrease in supply, what will happen?

Ans. (C) The supply curve will shift to the left and the equilibrium price will increase and the equilibrium quantity will decrease.

Considering the concept of cross-price elasticity, when two goods are complements:

Ans. (B) an increase in the price of one will cause a decrease in the quantity demanded of the other.

The Cross price elasticity is the relationship between tow goods. It could be negative or positive. whether the relationship between to goods is positive or negative is depends on whether the two gods are substitutes goods or Complements goods. If two goods are complements then t has negative cross elasticity of demand and hence and increase in the price of one good will falls the demand for other good.