Question

In the short-run if there is a surplus in the market for a product, the rationing...

In the short-run if there is a surplus in the market for a product, the rationing function of price can be expected to cause

A) an increasing shift in the demand for the product.

B) a decreasing shift in the supply of the product.

C) an increase in the market price of the product.

D) a decrease in the market price of the product

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Answer #1

Option D

D) a decrease in the market price of the product

There is a surplus in the market that means the quantity supplied is higher than the quantity demanded and an equilibrium is at Qd=Qs so the surplus forces the price down to the equilibrium level.

It is a movement along the curve and not shifts of any of the curve (demand or supply or both). To shift demand or supply curve there should be change in other components of demand or supply except the price.

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