Suppose that there is a renewed interest in eating caviar at the same time that the supply of Russian caviar shrinks. What would be the most likely effect of these events on the price and quantity of caviar sold?
A) Price rose and quantity sold fell.
B) Price rose and the effect on the quantity of caviar sold is ambiguous.
C) Price fell and the effect on the quantity of caviar sold is ambiguous.
D) Price fell and quantity sold rise.

Question

Quizplus · Accepted Answer

The increase in demand and decrease in supply both lead to a higher price. However, the effect on quantity is ambiguous because the increase in demand tends to increase quantity, while the decrease in supply tends to decrease quantity.

Suppose That There Is a Renewed Interest in Eating Caviar