In the following question you are asked to determine,other things equal,the effects of a given change in a determinant of demand or supply for product X upon (1) the demand (D) for,or supply (S) of,X; (2) the equilibrium price (P) of X;and (3) the equilibrium quantity (Q) of X. Refer to the given information.Consumer expectations that the price of X will rise sharply in the future will:

A) increase S,increase P,and increase Q.
B) increase D,increase P,and increase Q.
C) decrease S,increase P,and increase Q.
D) increase D,decrease P,and increase Q.

Question

Sarielis Llaurador · Accepted Answer

Final Answer : B, Explanation :  If consumers expect the price of X to rise sharply in the future, this will increase their desire to purchase X before the price rise occurs. This will cause an increase in demand (D) for X, shifting the demand curve to the right. As a result, equilibrium price (P) and equilibrium quantity (Q) will both increase. However, the expectation of a future price rise will not affect the supply (S) of X, so option A and C can be eliminated. Additionally, the expectation of a price rise will not cause a decrease in price, so option D can also be eliminated. Therefore, the correct answer is B.

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