Consider the market for portable air conditioners in equilibrium. A summer of unseasonably cool weather would cause:
A. the equilibrium price to increase and the equilibrium quantity to decrease.
B. the equilibrium price to decrease and the equilibrium quantity to increase.
C. both the equilibrium price and quantity to decrease.
D. both the equilibrium price and quantity to increase.
First consider the effects on demand and supply. What will occr is that demand will decrease and the curve will shift to the left. As a result, if you draw the diagram out, equilibrium price and quantity will decrease.
The correct answer is A. equilibrium price to increase and equilibrium quantity to decrease.
Explanation:
DETERMINANTS OF THE OFFER:
The price of the good: increasing the price of the good will increase the quantity offered and vice versa.
Price of resources and inputs used in the production of the good: As the price of the inputs of a good increases, its supply will decrease and vice versa. When talking about the price of resources and inputs, it refers to the price of labor (wages), price of raw materials, energy prices, interest rates, etc.
Production technology: by improving technology in production, the supply of a good will increase.
Expected future prices: If the price of the produced good is expected to increase in the short term, the offer will increase, and vice versa.
Number of bidders: With a larger number of bidders the offer of a good will increase and vice versa.
