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Chapter 5: Problem 32

For questions 31-34, use choices a, b, c, d, e, and f. (LO8) a) may rise, fall or remain the same b) may rise or remain the same c) may fall or remain the same d) will rise e) will fall f) will remain the same If demand and supply both fall, then equilibrium quantity__________

Short Answer

Expert verified
\(e) \text{ will fall}\)

Step by step solution

01

Understanding the relationship between demand, supply, and equilibrium quantity

Equilibrium quantity is the quantity at which the quantity demanded equals the quantity supplied. It occurs at the intersection of the supply and demand curves. When there is a change in either demand or supply or both, the equilibrium quantity can change.
02

Analyzing the situation when both demand and supply fall

In this case, demand and supply both fall. When demand decreases, this means that consumers want to purchase less of the good at any given price, so the demand curve shifts to the left. On the other hand, when supply decreases, it means that producers are willing to sell less of the good at any given price, thus the supply curve shifts to the left as well.
03

Understanding how changes in demand and supply affect equilibrium quantity

Both demand and supply shifting to the left means that the intersection point of the demand curve and the supply curve (the equilibrium point) will move down and to the left. Since we are only concerned about the equilibrium quantity, we can focus on the horizontal axis of the intersection point. As the intersection point moves to the left along the horizontal axis, the equilibrium quantity decreases.
04

Selecting the correct answer

The equilibrium quantity decreases in this scenario. So, the correct answer should represent a decrease in the equilibrium quantity. Based on the given choices, the correct answer is: e) will fall

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Most popular questions from this chapter

Changes in supply may be caused by changes in __________.- \((\mathrm{LO5})\) a) the cost of factors of production b) the level of technology c) the number of suppliers d) all of the above e) none of the above

The reason many homeowners cannot sell their homes when housing prices are falling is because __________ \- (LO9) a) there are no buyers in the market b) there are too many houses on the market c) no one can get a mortgage d) the homeowners are not willing to lower their prices enough

If the price of a product rises and as a result businesses increase their production, then __________. (LO5) a) supply has increased b) supply has decreased c) quantity supplied has increased d) quantity supplied has decreased e) both supply and quantity supplied have increased

An increase in the wage rate paid to construction workers will tend to __________.(LO5) a) decrease the demand for homes b) cause a movement along the supply curve for new homes c) decrease the supply of new homes d) increase the supply of new homes

An increase in the demand for steak could be caused quickly by a(n) __________.(LO2) a) fall in the price of steak b) increase in the supply of steak c) expectation of a future cutback in the supply of steak d) a decline in the price of chicken
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