Question

After a hurricane in Florida knocked out the regional water supply for several days, the demand for bottled water increased sharply. In a market economy, how will this increase in demand affect the equilibrium price and quantity of bottled water?a. Price will increase, and quantity will decrease. b. Price will decrease, and quantity will decrease. c. Price will decrease, and quantity will increase. d. Price will increase, and quantity will increase.

Answer 1

Answer:

The correct answer is letter "D": Price will increase, and quantity will increase.

Explanation:

If a natural disaster cuts the supply for water in a region, bottled water will face an increase in its quantity demanded as a substitute. Besides, due to scarcity, the bottled water is likely to face an increase in its price, thus, the equilibrium price of bottled water increases.