Exhibit 4-1 Supply and Demand Data In Exhibit 4-1, Suppose That a Reduction in the Price

question 18

Multiple Choice

Exhibit 4-1 Supply and demand data $$\begin{array} { | c | c | c | } \hline \text { Price } & \begin{array} { c } \text { Quantity } \\\text { demanded }\end{array} & \begin{array} { c } \text { Quantity } \\\text { supplied }\end{array} \\\hline \$ 1.00 & 500 & 50 \\1.50 & 450 & 150 \\2.00 & 400 & 250 \\2.50 & 300 & 300 \\3.00 & 150 & 350 \\\hline\end{array}$$ In Exhibit 4-1, suppose that a reduction in the price of an important input used to produce the good causes an increase in quantity supplied of 150 units at every price level. Assuming that demand does not change, the new equilibrium price will be:

• A) $1.00.
• B) $1.50.
• C) $2.00.
• D) $2.50.

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Definitions:

Fixed Budget

A Fixed Budget is a financial plan that allocates set amounts to specific categories or operations, without adjusting for changes in volume or activity levels.

Predicted Amount

An estimated figure or value anticipated based on current trends, analysis, or modeling.

Sales

The transactions involving the exchange of goods or services for money, constituting the primary revenue for most businesses.

Price Variance

The difference between the actual cost of a product or service and its standard or expected cost.