When the supply of a commodity decreases while demand remains the same price tends to:_____.
1 answer:
When the supply of a commodity decreases while demand remains same then the same price tends to increase.
Given that the supply of a commodity decreases while the demand remains same.
We are required to find the effect of decrease of supply on the price of the commodity if the demand remains same.
Supply is the amount of good that the producer manufactures and sends to the market.
Demand is the amount of good that the consumer wants to consume.
When the supply of a commodity decreases,the supply will shift leftwards. The demand remains same then from the graph we can find that the price of the commodity increases from P to P1.
Hence when the supply of a commodity decreases while demand remains same then the same price tends to increase.
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Answer: $903.13
Explanation:
The marginal cost should be $20 and not $2020
Given the following;
Marginal cost = $20
Q = 105 - 1P
Therefore ;
P = 105 - Q
Total revenue (TR) = Price(P) * Quantity(Q)
TR = (105 -Q)Q
Marginal revenue= 105 - 2Q
For optimal Monopoly;
MR = MC
105 - 2Q = 20
2Q = 105 - 20
Q = 85 ÷ 2
Q = 42.5
Therefore,
P = 105 - Q
P = 105 - 42.5 = 62.5
Social cost = area of triangle
Social cost = 0.5 * 42.5 * 42.5 =903.125
Social cost= $903.13
