Question

Figure 4 below shows a market. The equilibrium price and quantity is labeled. Refer to it as you answer the questions that follow.

1. If you learn that the quantity demanded in this market is greater than 100, what must be true about the price?
-The price is greater than $25
-The price is less than $25
-The price is equal to $25

2. If you learn that the quantity demanded in this market is greater than 100, what would we say about this market?
-There is a shortage, and eventually the price will increase
-There is a surplus, and eventually the price will increase
-There is a shortage, and eventually the price will decrease
-There is a surplus, and eventually the price will decrease

Answer 1

1. If you learn that the quantity demanded in this market is greater than 100, what must be true about the price?

Based on the information provided in Figure 4, if the quantity demanded is greater than 100, then the price must be less than $25. This is because at a price of $25, the quantity supplied is only 100 units, and the quantity demanded is greater than 100 units. Therefore, the price must be less than $25 to accommodate the increased demand.

2. If you learn that the quantity demanded in this market is greater than 100, what would we say about this market?

If the quantity demanded is greater than 100, then there is a surplus in the market. This means that there are more buyers willing to purchase the good than there are sellers willing to sell it, which will put downward pressure on the price. Eventually, the price will decrease to a level that equates the quantity demanded with the quantity supplied.

Explanation: