When a Surplus Exists in a Market,sellers

question 1

Multiple Choice

When a surplus exists in a market,sellers

• A)raise price,which increases quantity demanded and decreases quantity supplied,until the surplus is eliminated.
• B)raise price,which decreases quantity demanded and increases quantity supplied,until the surplus is eliminated.
• C)lower price,which increases quantity demanded and decreases quantity supplied,until the surplus is eliminated.
• D)lower price,which decreases quantity demanded and increases quantity supplied,until the surplus is eliminated.

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Definitions:

Demand

The quantity of a good or service that consumers are willing and able to purchase at various prices during a certain period of time.

Leakage

Any diversion of income from the domestic spending stream; includes saving, taxes, and imports.

Circular Flow

A model in economics that describes the movement of resources, goods and services, and money among different sectors in an economy.

Leakages-Injections Approach

An economic understanding and analysis of how savings, taxes, and imports (leakages) offset government spending, investments, and exports (injections) in the circular flow of income.