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Suppose roses are currently selling for 40 per dozen, but the equilibrium price of roses is30 per dozen. What would we expect?

1) An increase in the demand for roses
2) A decrease in the demand for roses
3) An increase in the supply of roses
4) A decrease in the supply of roses

User Cobbal
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1 Answer

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Final answer:

Since roses are being sold above the equilibrium price, we should expect sellers to adjust for the surplus by either decreasing supply or by strategies to increase demand, not a straightforward increase in supply or demand.

Step-by-step explanation:

Given that roses are selling for $40 per dozen when the equilibrium price is $30 per dozen, we would expect a surplus of roses in the market. In response to a surplus, we usually expect the price to fall to reach equilibrium, assuming all other factors remain constant (ceteris paribus assumption). This situation does not directly indicate a change in demand; rather, it is related to the quantity supplied at that higher price point. However, to address the surplus and move toward equilibrium, one would expect an adjustment that leads to an increased demand or a decreased supply, or both.

Let's examine the effects of changes in supply and demand on equilibrium price and quantity:





In this particular scenario, we would expect either a decrease in the supply of roses (option 4) to restore equilibrium at a price of $30 per dozen or adjustments on behalf of sellers to attract more buyers and increase demand.

User Frank Tudor
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