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29 votes
Which situation would cause the price of a product to increase the most?

A. Both the demand and supply fall
B. The demand rises while the supply falls
C. The demand falls while the supply rises
D. Both the demand and supply rises

ECONOMICS

User Loxdog
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2 Answers

21 votes
21 votes

Final answer:

The price of a product increases most significantly when demand rises and supply falls. Price ceilings can create shortages by capping prices below market equilibrium, and price floors can lead to surpluses by setting minimum prices above equilibrium. A rise in the supply of capital in the financial market typically leads to lower interest rates.

Step-by-step explanation:

The situation that would cause the price of a product to increase the most is when the demand rises while the supply falls. Basic principles of supply and demand dictate that if demand increases (more people want the product) and supply decreases (there are fewer products available), prices will go up as buyers are willing to pay more to secure the product in short supply.

Regarding the impact of price ceilings and price floors, a price ceiling is a legal maximum on the price of a good or service, while a price floor is a legal minimum. Therefore, a price ceiling does not directly shift demand or supply, but can create a shortage by keeping prices lower than the equilibrium price which would naturally balance the market. Meanwhile, a price floor does not shift demand or supply either but can create a surplus if prices are kept higher than what the market would determine.

In the financial market, a decline in interest rates can be caused by a rise in supply of capital, such as when savings increase or when the central bank injects more liquidity into the banking system.

User Superstar
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25 votes
25 votes

Answer:B the demand rises while the supply falls

Step-by-step explanation:

if a lot of people buy an item then the supply of that item will shrink and since people want the item so much then they'll be willing to buy it for more if there are only a few left

User Ivan Slaughter
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3.2k points