Question

Consider a soybean farmer who expects a price level of 100 in the coming year. If the actual price level turns out to be 90, soybean prices will ______, and if the farmer mistakenly assumes that the price of soybeans declined relative to other prices of goods and services, she will respond by the _______.

Answer 1

Answer: (1) Lower than the expected price

(2) Reducing the quantity supplied.

Step-by-step explanation:

The farmer of a soybean expects that the price of a soybean is 100 in the coming year but the actual price of soybean turns out to be 90. It was observed that the actual price of a soybean is lower than the expected price.

If the farmer assumes that the price of soybean declined as compared to the other goods and services then the farmer respond to this price by reducing the quantity of soybean supplied.