Question

Leading economic indicators suggest that incomes will be going up next year. In response to these reports, companies are forecasting increased prices for future sales of their goods. As a result of these increases, the supply curve will: a. shift to the right, causing the equilibrium price to decrease. b. remain the same, but the equilibrium price will increase. c. remain the same, but the equilibrium price will decrease. d. shift to the right, causing the equilibrium price to increase. e. shift to the left, causing the equilibrium price to increase.

Answer 1

Answer: Option (e) is correct.

Step-by-step explanation:

Since firms are expecting a higher price in the near future, so they will think to diminish their supply presently so as to sell products later on at the more expensive rate.

Hence, all the firms wants to increase their profit by shifting their supply curve leftwards in the current situation.

So, supply curve shifts towards the left and causing an increase in the equilibrium price.