Figure 3-6 -Refer to Figure 3-6.The Figure Above Represents the Market for Represents

question 22

Multiple Choice

Figure 3-6

-Refer to Figure 3-6.The figure above represents the market for canvas tote bags.Assume that the price of tote bags is $15.At this price

• A)the quantity demanded exceeds the quantity supplied by 75. The price will eventually rise to $25 where quantity demanded will equal quantity supplied.
• B)the demand exceeds the supply of tote bags by 55. Some consumers will have an incentive to offer to buy tote bags at a higher price.
• C)there is a shortage, equal to 55 tote bags, that will be eliminated when the price rises to $25.
• D)there is a shortage equal to 55 tote bags; the price of tote bags will rise until demand is equal to supply.

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Definitions:

Optimal Consumption Rule

A guideline suggesting that to maximize utility, consumers should allocate their budget in a way that the last dollar spent on each good or service yields the same level of marginal utility.

Marginal Utility

The extra gratification or advantage a person receives by consuming an additional unit of a specific good or service.

Marginal Utilities

The extra pleasure or benefit a consumer gets from purchasing and using an additional unit of a product or service.

Utility-Maximizing

A principle in economics where consumers aim to achieve the highest level of satisfaction with their choices, subject to their income and the prices of goods and services.