Starting with AD₁ and AS₁ in the Graph Below, If

question 36

Multiple Choice

Starting with AD₁ and AS₁ in the graph below, if the world price of oil rises, then in the short run:
Graph 14-3

• A)output stays the same and prices fall
• B)output decreases and prices fall
• C)output decreases and prices rise
• D)output increases and prices rise
• E)output stays the same and prices rise

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Definitions:

Equilibrium Quantity

The amount of goods or services supplied in a market that is exactly equal to the quantity demanded at the equilibrium price.

Rationing Device

A method used to distribute scarce resources, goods, or services among people.

Supply Shifts

Movements of the supply curve to the right or left, indicating a change in the quantity supplied at each price point, due to factors other than the price of the good itself.

Equilibrium Quantity

The quantity of goods or services supplied that is exactly equal to the quantity demanded at the market equilibrium price.