Upon news of Hurricane Florence was aiming for North Carolina, residents flocked

Question

Upon news of Hurricane Florence was aiming for North Carolina, residents flocked to Lowes to purchase electricity generators. At the same time, three Briggs and Stratton production plants- a company known for making high-quality generators- shut down leading up to the storm. After these two effects, what were the net effects on equilibrium prices and quantities?
A. Price up, Quantity up B. Price up, Quantity down C. Price down, Quantity up D. Price down, Quantity down E. Price Ambiguous, Quantity up F. Price Ambigious, Quantity down G. Price up, Quantity Ambiguous H. Price down, Quantity Ambiguous I. Both Price and Quantity Ambiguous Upon news of Hurricane Florence was aiming for North Carolina, residents flocked to Lowes to purchase electricity generators. At the same time, three Briggs and Stratton production plants- a company known for making high-quality generators- shut down leading up to the storm. After these two effects, what were the net effects on equilibrium prices and quantities?
A. Price up, Quantity up B. Price up, Quantity down C. Price down, Quantity up D. Price down, Quantity down E. Price Ambiguous, Quantity up F. Price Ambigious, Quantity down G. Price up, Quantity Ambiguous H. Price down, Quantity Ambiguous I. Both Price and Quantity Ambiguous
A. Price up, Quantity up B. Price up, Quantity down C. Price down, Quantity up D. Price down, Quantity down E. Price Ambiguous, Quantity up F. Price Ambigious, Quantity down G. Price up, Quantity Ambiguous H. Price down, Quantity Ambiguous I. Both Price and Quantity Ambiguous

Explanation / Answer

Due to the approaching hurricane, people have increased their purchase of electric generators.

This will increase the demand for electric generators.

On the other hand, a firm making high quality electric generators has shut down its plant. This will reduce the production of electric generators.

Thus, supply of electric generators will decrease.

When there is simultaneous increase in demand and decrease in supply of a good, there is rise in price of good.

However, impact on the quantity depends on the magnitude of change in both demand and supply.

Thus,

Equilibrium price will rise while impact on equilibrium quantity would be ambiguous.

Hence, the correct answer is the option (G).

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