Figure 3-8

question 33

Multiple Choice

Figure 3-8
-Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D₁ and S₁ (point A) . If there is a shortage of apples, how will the equilibrium point change?

• A) The equilibrium point will move from A to B.
• B) The equilibrium point will move from A to C.
• C) There will be no change in the equilibrium point.
• D) The equilibrium point will move from A to E.

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Definitions:

Time-Value

The idea that having money now is more valuable than having the same sum in the future because of the potential to earn more over time.

Discounting

The process of determining the present value of a payment or a stream of payments that is to be received in the future.

Compounding

The process whereby interest is added to the principal sum, so that from that moment on, the interest that has been added also earns interest.

Demand Curve

A graph representing the relationship between the price of a good and the quantity demanded, with price on the vertical axis and quantity on the horizontal axis.