Question

Assume the costs of production in the U.S. auto industry are rising and, at the same time, the prices of Japanese-made autos are decreasing. What would reasonably be expected to happen to the equilibrium price and quantity of U.S.-made autos?
A) Price will increase; quantity cannot be determined.
B) Price will decrease; quantity cannot be determined.
C) Quantity will increase; price cannot be determined.
D) Quantity will decrease; price cannot be determined.

Answer 1

Option D , Quantity will decrease; price cannot be determined.

Explanation:

The equilibrium price is the market value in which the amount of supplied goods is equal to the number of requested goods. That's where the market is crossed by the demand and supply curves.

The relationship between demand and supply typically sets the price and value of goods in a free and competitive industry. But income, flavors, preferences, demographic, etc. also alter the production and Value of goods. Sometimes both market forces change simultaneously.

During battle, for example, a commodity shortage reduces supply and demand is also rising at high employment levels and gross wage pays.