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 ?
Correct answer: D. price will increase, quantity is ambiguous.
- A. The impact on both price and quantity is ambiguous
- B. Price will decrease, quantity is ambiguous.
- C. price will increase, quantity will decrease
- D. price will increase, quantity is ambiguous.
- E. Price will increase, quantity will increase
Explanation
Buyers expecting a higher future price increase current demand, while sellers hold back current supply, so price rises from both shifts. Demand raises quantity but reduced supply lowers it, making the quantity effect ambiguous.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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