Question

If a nonrenewable natural resource's price is expected to increase at a rate faster than the...

If a nonrenewable natural resource's price is expected to increase at a rate faster than the interest rate, then the supply today will

A) the demand today will decrease.                                           B) the supply today will decrease.

C) the price today will fall.                                                            D) the supply today will increase.

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Answer #2

Correct option is D - the supply today will increase.

In this situation the supply will be increased by the producer to make a profit in the short term, while the increase in the price of non-renewable sources will have an adverse effect on the demand in the long term, which will lead to a comparative decrease in the demand, due to which in the long term Supply will also be affected and supply will be reduced by the producer as to attain equilibrium price.

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