20. (Figure: Price Adjustment) Refer to the figure. If the price of the product
ID: 1106973 • Letter: 2
Question
20. (Figure: Price Adjustment) Refer to the figure. If the price of the product is S14, there is a: Figure: Price Adjustment Supply $17 16 Demand A) B) C) D) 0 85 100 120 130 shortage of 30 units of the product, and the price will rise to $16. surplus of 20 units of the product, and the price will rise to $16. shortage of 50 units of the product, and the price will rise to $16. surplus of 40 units of the product, and the price will rise to $16. 21. (Figure: Demand Shift) In the figure, the demand curve shifted from Do to Di. To describe this movement, we would say that: Figure: Demand Shift 580 Supply 20 D, 4 12 16 20 A) demand increased, which caused an increase in supply B) quantity demanded increased, which caused an increase in supply C) demand increased, which caused an increase in quantity supplied D) quantity demanded increased, which caused an increase in quantity supplied 22. The demand curve for oil is inelastic, meaning that the quantity of oil demanded: A) rises by a lot even when the price of oil increases by only a little. B) rises by only a little even when the price of oil increases by a lot. C) falls by a lot even when the price of oil increases by only a little. D) falls by only a little even when the price of oil increases by a lot.Explanation / Answer
(20)
As it can be seen in the graph, that at price $14, there is the demand for 130 units while the supply is 80 units. It means there is a shortage of 50 units( 130 -80=50).
Hence option C is the correct answer since there is the shortage of 50 units, so the price will tend to rise until market achieve equilibrium.
(21)
Option C describes it best because, with the rightward shift of the demand curve from Do to D1, the price increases, it leads to increase in the profit of the firm, so they supply more goods and services in the economy.It means there will be an increase in the quantity supplied of goods due to increase in the price of goods and price has increased due to increased demand for goods.
Hence option C is the correct answer.
(22)
The inelastic demand means that due to more change in the price of any goods, there is very little change in the demand for goods.
Therefore if the demand for oil is inelastic, it means if the there is a large increase in the price of oils, then the quantity demand falls by very little amount.
Hence option D is the correct answer.
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