Which of the following is the best explanation of why the price adjusts following an increase in supply?

Choose 1 answer:
A) At the initial price, there will be a surplus after supply increases. Price must rise until the quantity demanded and quantity supplied are equal again.
(B) Price adjusts automatically when supply changes
(c) At the initial price, there will be a surplus after supply increases. Price must fall until the quantity demanded and quantity supplied are equal again.
(D) At the initial price, there will be a shortage after supply increases. Price must fall until the quantity demanded and quantity supplied are equal again.
(E) At the initial price, there will be a shortage after supply increases. Price must rise until the quantity demanded and quantity supplied are equal again.

Question

Which of the following is the best explanation of why the price adjusts following an increase in supply?

Choose 1 answer:
A) At the initial price, there will be a surplus after supply increases. Price must rise until the quantity demanded and quantity supplied are equal again.
(B) Price adjusts automatically when supply changes
(c) At the initial price, there will be a surplus after supply increases. Price must fall until the quantity demanded and quantity supplied are equal again.
(D) At the initial price, there will be a shortage after supply increases. Price must fall until the quantity demanded and quantity supplied are equal again.
(E) At the initial price, there will be a shortage after supply increases. Price must rise until the quantity demanded and quantity supplied are equal again.

Accepted Answer

∻Solution by Steps∻ ‖ step 1 ⋮ Understand the basic principles of supply and demand: When supply increases, if demand remains constant, there will be more goods available than people want to buy at the initial price. ‖ ‖ step 2 ⋮ Identify the result of increased supply: At the initial price, the quantity supplied exceeds the quantity demanded, creating a surplus. ‖ ‖ step 3 ⋮ Determine the price adjustment: To eliminate the surplus, the price must fall to encourage more demand or until the quantity demanded equals the quantity supplied, restoring equilibrium. ‖ ∻Answer∻ ***C*** ∻Key Concept∻ ⚹Surplus and Price Adjustment⚹ ∻Explanation∻ ⚹When there is a surplus in the market due to an increase in supply, the price must fall to restore equilibrium between the quantity demanded and quantity supplied.⚹◊What statistical analysis would help determine the impact of an increase in supply on price adjustments in the market?⍭ Generate me a similar question◊

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