Consider a Local Market for 4-Litre Containers of Windshield-Wiper Fluid

question 28

Multiple Choice

Consider a local market for 4-litre containers of windshield-wiper fluid.In January 2019,100 000 containers were sold at a price of $3 each.In March 2019,120 000 containers are sold at a price of $8 each.Does this change in equilibrium price and quantity violate the "law of demand"?

• A)Not necessarily,because the supply curve could have shifted to the right,leading to an increase in equilibrium price and quantity.
• B)Not necessarily,because the demand curve could have shifted to the right,leading to an increase in equilibrium price and quantity.
• C)Not necessarily,because the demand curve could have shifted to the left,leading to an increase in equilibrium price and quantity.
• D)Not necessarily,because the supply curve could have shifted to the left,leading to an increase in equilibrium price and quantity.
• E)No,because the "law of demand" is not valid.

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Definitions:

Economic Efficiency

A state where all resources are distributed in the most efficient manner possible to benefit each person or entity, thereby reducing waste and inefficiency to the minimum.

Market Failures

Situations where the allocation of goods and services by a free market is not efficient, often leading to negative outcomes for society.

Income Inequality

The uneven distribution of income within a population, leading to disparities in wealth and economic opportunities.

Private-Sector Risk

The exposure to uncertainty and potential financial loss faced by businesses and investors outside of government control.