(Figure: Supply-Driven Price Change) Refer to the Figure

question 2

Multiple Choice

(Figure: Supply-Driven Price Change) Refer to the figure. When the supply curve shifts from S0 to S1, the equilibrium price rises to:

• A) $12 and the equilibrium quantity falls to 70.
• B) $10 and the equilibrium quantity falls to 100.
• C) $12 and the equilibrium quantity falls to 40.
• D) $10 and the equilibrium quantity falls to 70.

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Definitions:

Inferior Good

A type of product for which demand decreases as the income of the consumer increases.

Cross Elasticity

Cross elasticity of demand measures the responsiveness of the demand for a good to a change in the price of another good, identifying substitute or complementary relationships.

Quantity Demanded

The total amount of goods or services that consumers are willing and able to buy at a specific price level, at a given point in time.

Normal Good

A type of good for which demand increases as the income of consumers increases, and vice versa.