Question

In the short run, when consumers buy more durable goods like couches and refrigerators, the price level __ and equilibrium output __.

A) doesn't chance, rises

B) falls, rises

C) rises , falls

D) rises, doesn't change

E) none of the above

Answer 1

Since the law of demand stats that there is an opposite relationship between price and quantity demanded and other factors which affect the demand remains same. The demand curve shows an inverse relationship between price and quantity demand.

In case of change in the quantity demand, there will be movement along the demand curve and in case of change in the demand, there will be shift of the demand curve.

So when consumers buy more durable goods like couches and refrigerators in short-run, the demand for these good increases and demand curve shifts rightward. Hence equilibrium price and quantity both increases.

Hence it can be said that in the short run, when consumers buy more durable goods like couches and refrigerators, the price level rises and equilibrium output rises.

Hence the correct answer is rises, rises.

Hence option E is the correct answer.