Question

Suppose both buyers and sellers of wheat expect the price of wheat to rise in the near future. What would we expect to happen to the equilibrium price and quantity in the market for wheat today?
a. Equilibrium price will decrease; the effect on quantity is ambiguous.
b. Equilibrium quantity will decrease; the effect on price is ambiguous.
c. Equilibrium quantity will increase; the effect on price is ambiguous.
d. Equilibrium price will increase, equilibrium quantity will decrease"

Answer 1

Answer:

d. Equilibrium price will increase, equilibrium quantity will decrease"

Explanation:

"Ceteris paribus" all things being equal; the higher the price, the lower the quantity demanded. If there are speculations about possible increment in price of wheat in near future time, it will result into panic buying of wheat in the market today and that will definitely increase the equilibrium price of the wheat and decrease the equilibrium quantity of wheat demanded.

Answer 2

Answer:

D) Equilibrium price will increase, equilibrium quantity will decrease.

Explanation:

Supply and demand curves intersect and this means the market is in equilibrium. In Economics, once the price of a product increases, the demand rate falls hysterically. When a market price is above equilibrium, quantity supplied seems larger than quantity demanded, resulting in a surplus (excess demand). When the price of a product is raised, the quantity demanded for that product will decrease until it reaches equilibrium level. A firm looking towards increasing the price of their product or service tends to brace themselves for a time filled with surpluses