What happens to the price and quantity of cheese sold if the demand for cheese increases and the supply of cheese decreases?

Choose 1 answer:
(A) Price decreases; quantity increases.
(B) Price increases; quantity stays the same.
(c) Price increases; we do not know what happens to quantity.
(D) Price decreases; we do not know what happens to quantity.
(E) Price decreases; quantity doesn't change.

Question

What happens to the price and quantity of cheese sold if the demand for cheese increases and the supply of cheese decreases?

Choose 1 answer:
(A) Price decreases; quantity increases.
(B) Price increases; quantity stays the same.
(c) Price increases; we do not know what happens to quantity.
(D) Price decreases; we do not know what happens to quantity.
(E) Price decreases; quantity doesn't change.

Accepted Answer

∻Solution∻ ‖ a ⋮ Demand Increase: When the demand for cheese increases, the demand curve shifts to the right. This typically leads to a higher equilibrium price and a higher equilibrium quantity. ‖ ‖ b ⋮ Supply Decrease: When the supply of cheese decreases, the supply curve shifts to the left. This typically leads to a higher equilibrium price and a lower equilibrium quantity. ‖ ‖ c ⋮ Combined Effect: With an increase in demand and a decrease in supply, the price of cheese will definitely increase. However, the effect on quantity is ambiguous because it depends on the relative magnitudes of the shifts in the demand and supply curves. ‖ ∻Answer∻ ⚹ (C) Price increases; we do not know what happens to quantity. ⚹ ∻Key Concept∻ ⚹ Interaction of Demand and Supply Shifts ⚹ ∻Explanation∻ ⚹ When both demand increases and supply decreases, the price will definitely rise. However, the change in quantity depends on the relative shifts of the demand and supply curves, making it uncertain. ⚹◊What economic concept can explain the relationship between changes in demand and supply on the price and quantity of a good in the market?⍭ Generate me a similar question◊

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