If Demand Increases While Supply Decreases for a Particular Good

question 19

Multiple Choice

If demand increases while supply decreases for a particular good, the:

• A) equilibrium price will increase while the quantity of the good produced and sold could increase, decrease, or remain constant.
• B) quantity of the good produced and sold will decrease while its equilibrium price could increase, decrease, or remain constant.
• C) quantity of the good produced and sold will increase while its equilibrium price could increase, decrease or remain constant.
• D) equilibrium price will decrease while the quantity of the good produced and sold could increase, decrease, or remain constant.

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Definitions:

Price Level

A uniform average of prices across the diverse range of economic goods and services.

Potential Output

The highest level of real gross domestic product (GDP) that can be sustained over the long term without increasing inflation.

Price Level

An indicator reflecting the average prices of goods and services in an economy at a given time, showcasing the cost of living and inflation.

Firms' Expectations

The outlook or anticipations of businesses regarding future economic conditions, sales, and profitability, which can influence their investment and production decisions.