Figure 3.5 -In Figure 3.5, If the Change in Demand Occurred Before

question 54

Multiple Choice

Figure 3.5

-In Figure 3.5, if the change in demand 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 until the price reached 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 reached P₄.
• E) none of these would occur.

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Definitions:

Compounded Semi-annually

A method of calculating interest where the interest is added to the principal amount twice a year and then interest is subsequently earned on the new principal.

Amortization Period

The total length of time over which an individual loan or debt is scheduled to be paid off.

Compounded Semi-annually

Compounded semi-annually refers to the calculation of interest where the principal amount is credited with interest twice a year.

Amortization Period

The total time period over which a loan or mortgage is scheduled to be paid off through regular payments.