A Decrease in Supply Raises the Price of a Good

question 72

True/False

A decrease in supply raises the price of a good, but it also decreases the quantity demanded, which lowers the price of a good. The net effect on price is ambiguous.

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Definitions:

Cash Disbursements

The actual outflow of cash for expenses, such as paying salaries, suppliers, and other operating expenses.

Inventory Purchases

The total cost incurred by a business to buy goods for resale or raw materials to produce finished goods.

Operating Expenses

Costs related to the day-to-day functions of a business outside of direct labor and materials, such as rent, utilities, and office supplies.

Budgeted Cash Disbursements

An estimation of the cash outflows a company anticipates over a specified period, including expenses, payments to creditors, and investments.