Question

In an unregulated market characterized by excess demand, you accurately predict that the price will _______, the quantity demanded will ______, and the quantity supplied will _______.

a. rise; rise; fall.

b. rise; fall; rise. c. fall; fall; rise. d. fall; rise; fall. e. fall; fall; fall.

Answer 1

If there is excess demand, it means quantity demand is more than quantity supplied at the given price level, so price will rise in this case, so when price increases, the quantity demand falls because it is expensive to demand more and the quantity supplied increase because it is profitable to supply more at higher price.

In an unregulated market characterized by excess demand, you accurately predict that the price will rise, the quantity demanded will fall, and the quantity supplied will rise.

Hence option b is the correct answer.

b. rise; fall; rise.