If the supply of a product increases, then we would expect equilibrium pricea.to increase and equilibrium quantity to decrease.
b.and equilibrium quantity to both decrease. c.and equilibrium quantity to both increase. d.to decrease and equilibrium quantity to increase.
1 answer:
Answer:
The correct answer is option d.
Explanation:
An increase in the supply of a product will cause the supply curve to shift to the right. This rightward shift will cause the demand curve and supply curve to intersect at a lower price.
This will cause the quantity demanded of the product to increase and the price of the product to decrease.
A decrease in the supply will cause the quantity demanded to decrease and price to increase.
The effect of supply increase is indicated through the given figure.
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Answer:
Jessica should consume more of good A.
Explanation:
Jessica spends all her income on two goods, A and B.
The price of A is $5, and the price of B is $7.
At the current consumption bundle, the marginal utility of A is 10, and the marginal utility of B is 21.
The total utility is maximized when the ratio of marginal utility and price of the goods consumed is equal for all the goods in the bundle.
The ratio for Good A
=
= 2
The ratio for good B
=
= 3
Since the ratio is higher for good B, the consumer should shift from consumption of good B to good A until the ratio is equal for both the goods.