Assume the demand for watermelons is downward sloping. A decrease in price from $3 per pound...
Assume the demand for watermelons is downward sloping. A decrease in price from $3 per pound to $2 per pound
a. Could have been caused by an increase in supply
b. Will cause an increase in supply
c. Will cause a smaller quantity of watermelons to be demanded
d. Will cause demand to decrease
e. Will cause demand to increase
Homework Answers
Answer is option a)
Since price of product has fallen, so consumers will demand more,
So a higher quantity of watermelon will be Demanded. So option c is incorrect.
Since only price has changed thus only quantity demanded will change oy, no change in Demand which is affected by the change in parameters like income, taste , preferences.
So option d & e are false.
Thus if supply of a product rises, then it's price falls, so option a is right .
Fall in price will not cause the increase in supply
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