Assume in a competitive market that price is initially below the equilibrium level. We can predict that price will A. decrease, quantity demanded will decrease, and quantity supplied will increase. B. decrease and quantity demanded and quantity supplied will both decrease. C. increase, quantity demanded will increase, and quantity supplied will decrease. D. increase, quantity demanded will decrease, and quantity supplied will increase.

Question

Rosemary Stewart

Business

15 December, 05:32

Assume in a competitive market that price is initially below the equilibrium level. We can predict that price will A. decrease, quantity demanded will decrease, and quantity supplied will increase. B. decrease and quantity demanded and quantity supplied will both decrease. C. increase, quantity demanded will increase, and quantity supplied will decrease. D. increase, quantity demanded will decrease, and quantity supplied will increase.

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Answers (1)

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Slade Maynard · Answer 1

The correct answer is option D.

Explanation:

In a competitive market, the initial price is lower than the equilibrium price. When the price is lower than the equilibrium price. The quantity demanded will be greater. The quantity supplied will be smaller. There will be a shortage in the market.

This will cause the market price to increase. The quantity demanded will decrease due to the increase in the price, while the quantity supplied will increase.