In the Figure Given Below D₁ and S₁ Are the Initial

question 73

Multiple Choice

In the figure given below D₁ and S₁ are the initial demand and supply curves for a commodity in the market.
Figure 3.3

-Refer to Figure 3.3. If the change in the demand in this market occurred before the change in supply, then starting from the initial equilibrium:

• A) firms would experience a fall in profits and then a gradual increase in profits after the change in supply occurred.
• B) there would be an immediate shortage, lasting until the price reaches P₂.
• C) price would change from P₁ to P₂ after the change in demand and would change again from P₃ to P₄ after the change in supply.
• D) there would be a surplus until the price reaches P₄.
• E) there would be a surplus even after price reaches P₄.

---

Definitions:

Bounded Rationality

A concept suggesting that the cognitive limitations of the mind, and the finite amount of time available, limit human decision-making capabilities.

Limited Information

A situation where decision-makers do not have access to all the data or facts needed to make an informed decision.

Satisficing

A decision-making strategy that aims for a satisfactory or adequate result, rather than the optimal solution, due to constraints like time or information.

Decision-Making Process

The steps or stages involved in choosing a course of action from several alternatives, typically involving problem identification, analysis, and the selection of the best solution.