Changes in Equilibrium

In the market for scooters, the price of one of the resources used to produce scooters has decreased.

Which of the following graphs show best represents how this market is affected by a decrease in the cost of producing scooters?

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What will be the new equilibrium as a result of the decrease in supply?

• E₁

• P_B, Q_Y

• P_A, Q_Y

• P_B, Q_X

• E₂

Which of the following statements about the decrease in demand shown in the graph is correct?

• The new equilibrium is E₁

• The new equilibrium is P = P_X and Q = Q_A

• The new equilibrium is P = P_Y and Q = Q_B

• The new equilibrium is E₂

• The new equilibrium is P = P_Y and Q = Q_A

Which of the following is the best explanation of why the price adjusts following an increase in supply?

• At the initial price, there will be a shortage after supply increases. Price must rise until the quantity demanded and quantity supplied are equal again.

• At the initial price, there will be a surplus after supply increases. Price must fall until the quantity demanded and quantity supplied are equal again.

• At the initial price, there will be a surplus after supply increases. Price must rise until the quantity demanded and quantity supplied are equal again.

• At the initial price, there will be a shortage after supply increases. Price must fall until the quantity demanded and quantity supplied are equal again.

• Price adjusts automatically when supply changes.

If the demand for this good increases, which of the following is the most likely be the new price and quantity in this market?

• P₅; Q_A

• P₅; Q_C

• P₄; Q_A

• P₃; Q_A

• P₃; Q_C