Grasping Supply and Demand in Economics

In a small town with no banana sellers, there's a high demand but zero supply. Peter starts selling bananas, making significant profits as the sole supplier. Over time, Sarah notices Peter's success and begins selling bananas too, increasing the supply and reducing Peter's profits. As more sellers enter the market, the supply grows, potentially exceeding demand, leading to some sellers going out of business. Eventually, the market reaches a balance between supply and demand.

What is the initial situation in the small town regarding bananas?

• Zero supply and decent demand

• Low supply and low demand

• High supply and low demand

• High supply and high demand

What is the main reason for the initial imbalance in the banana market?

• High supply and low demand

• High supply and high demand

• Zero supply and decent demand

• Low supply and low demand

Why does Peter initially make huge profits?

• Because he is the only seller and there is high demand

• Because he has a large supply of bananas

• Because he sells bananas at a high price

• Because he advertises his bananas well

What happens when Sorrow starts selling bananas?

• The demand for bananas increases

• Peter's profits increase

• The supply of bananas increases

• The price of bananas increases

What is the effect of too many people selling bananas without an increase in demand?

• The price of bananas increases

• The demand for bananas decreases

• Some sellers go out of business

• The supply of bananas decreases

What tends to happen eventually in the banana market?

• An increase in supply

• A permanent imbalance

• A decrease in demand

• A balance between supply and demand