Deck 2: The Basics of Supply and Demand

Question 1

A supply curve reveals:

A) the quantity of output consumers are willing to purchase at each possible market price.
B) the difference between quantity demanded and quantity supplied at each price.
C) the maximum level of output an industry can produce, regardless of price.
D) the quantity of output that producers are willing to produce and sell at each possible market price.

Answer 1

the quantity of output that producers are willing to produce and sell at each possible market price.

Question 2

The battery packs used in electric and hybrid automobiles are one of the largest cost components for manufacturing these cars. As the price of these batteries decline, we expect that the:

A) supply curve for electric and hybrid autos will shift rightward.
B) supply curve for electric and hybrid autos will shift leftward.
C) demand curve for electric and hybrid autos will shift rightward.
D) demand curve for electric and hybrid autos will shift leftward.

Answer 2

supply curve for electric and hybrid autos will shift rightward.

Question 3

Figure 2.1.1
Refer to Figure 2.1.1 above. Starting from point A, how do the firms in the market react when the price of coffee increases from $6.00 to $7.50 per pound?

A) The supply curve shifts to the right and the quantity supplied increases to 10 million pounds per year.
B) The supply curve shifts from S1 to S2, but the market moves from A to B, so the quantity supplied increases to 9 million pounds per year.
C) The market moves from A to B temporarily, but eventually will settle at point C, where the quantity supplied will be 10 million pounds.
D) The supply curve does not shift, but the quantity supplied increases from 7 to 9 million pounds per year.

Answer 3

The supply curve does not shift, but the quantity supplied increases from 7 to 9 million pounds per year.

Question 4

To protect the cod fishery off the northeast coast of the U.S., the federal government may limit the amount of fish that each boat can catch in the fishery. The result of this public policy is to:

A) shift the cod demand curve to the left.
B) shift the cod demand curve to the right.
C) shift the cod supply curve to the right.
D) shift the cod supply curve to the left.

Question 5

To protect the cod fishery off the northeast coast of the U.S., the federal government may limit the amount of fish that each boat can catch in the fishery. The result of this public policy is to:

A) shift the cod demand curve to the left.
B) shift the cod demand curve to the right.
C) shift the cod supply curve to the right.
D) shift the cod supply curve to the left.

Question 6

Which of the following will cause the demand curve for Beatles' compact discs to shift to the right?

A) An increase in the price of the discs
B) A decrease in consumers' incomes
C) An increase in the price of Phil Collins' latest compact disc (a substitute)
D) all of the above
E) none of the above

Question 7

Coffee and cream:

A) are both luxury goods.
B) are complements.
C) are both more inelastic in demand in the long run than in the short run.
D) have a positive cross price elasticity of demand.

Question 8

The price of good A goes up. As a result, the demand for good B shifts to the left. From this we can infer that:

A) good A is used to produce good B.
B) good B is used to produce good A.
C) goods A and B are substitutes.
D) goods A and B are complements.
E) none of the above

Question 9

Due to the recent increase in the price of natural gas, the quantity of coal demanded by electric power generation plants has increased. Based on this information, coal and natural gas are:

A) complements.
B) substitutes.
C) independent goods.
D) none of the above

Question 10

Assume that steak and potatoes are complements. When the price of steak goes up, the demand curve for potatoes:

A) shifts to the left.
B) shifts to the right.
C) remains constant.
D) shifts to the right initially and then returns to its original position.

Question 11

Which of the following would shift the demand curve for new textbooks to the right?

A) A fall in the price of paper used in publishing texts
B) A fall in the price of equivalent used textbooks
C) An increase in the number of students attending college
D) A fall in the price of new textbooks.

Question 12

Figure 2.1.1
Refer to Figure 2.1.1 above. Lower material costs-indeed lower costs of any kind-make production more profitable. Starting at point A, which of the following best represents this assertion?

A) The move from A to B
B) The move from A to C
C) A move from A to B, and then to C
D) A move from A to C, and then to B

Question 13

When an industry's raw material costs increase, other things remaining the same,

A) the supply curve shifts to the left.
B) the supply curve shifts to the right.
C) output increases regardless of the market price and the supply curve shifts upward.
D) output decreases and the market price also decreases.

Question 14

The discussion of Figure 2.2 in the text indicates that quantity demanded for most goods tends to increase as income rises. However, the quantity of bananas demanded in the U.S. tends to decrease as income rises. Under this condition, we expect that an increase in consumer income shifts the demand curve for bananas:

A) rightward
B) no shift.
C) leftward.
D) upward.

Question 15

Sugar can be refined from sugar beets. When the price of those beets falls,

A) the demand curve for sugar would shift right.
B) the demand curve for sugar would shift left.
C) the supply curve for sugar would shift right.
D) the supply curve for sugar would shift left.

Question 16

Rare earth metals are used to manufacture some important electronic components in popular products like cell phones. These metals are not really rare, but they are expensive to extract from the ground. What happens to the market for the rare earth metals if these extraction costs increase?

A) Demand curve shifts leftward
B) Demand curve shifts rightward
C) Supply curve shifts leftward
D) Supply curve shifts rightward

Question 17

Which of the following would cause a shift to the right of the supply curve for gasoline? I. A large increase in the price of public transportation.
II) A large decrease in the price of automobiles.
III) A large reduction in the costs of producing gasoline.

A) I only
B) II only
C) III only
D) II and III only

Question 18

Plastic and steel are substitutes in the production of body panels for certain automobiles. If the price of plastic increases, with other things remaining the same, we would expect:

A) the price of steel to fall.
B) the demand curve for steel to shift to the right.
C) the demand curve for plastic to shift to the left.
D) nothing to happen to steel because it is only a substitute for plastic.
E) the demand curve for steel to shift to the left.

Question 19

Which of the following events will cause a leftward shift in the supply curve of gasoline?

A) A decrease in the price of gasoline
B) An increase in the wage rate of refinery workers
C) Decrease in the price of crude oil
D) An improvement in oil refining technology
E) all of the above

Question 20

You are analyzing the demand for good X. Which of the following will result in a shift to the right of the demand curve for X?

A) A decrease in the price of X
B) An increase in the price of a good that is a complement to good X
C) An increase in the price of a good that is a substitute for X
D) all of the above

Question 21

Assume that the current market price is below the market clearing level. We would expect:

A) a surplus to accumulate.
B) downward pressure on the current market price.
C) upward pressure on the current market price.
D) lower production during the next time period.

Question 22

Scenario 2.1:
The demand for books is: Q_d = 120 - P
The supply of books is: Q_s = 5P
Refer to Scenario 2.1. What is the equilibrium quantity of books sold?

A) 25
B) 50
C) 75
D) 100
E) none of the above

Question 23

Scenario 2.1:
The demand for books is: Q_d = 120 - P
The supply of books is: Q_s = 5P
Refer to Scenario 2.1. If P = $15, which of the following is true?

A) Quantity supplied is greater than quantity demanded.
B) Quantity supplied is less than quantity demanded.
C) Quantity supplied equals quantity demanded.
D) There is a surplus.

Question 24

Scenario 2.1:
The demand for books is: Q_d = 120 - P
The supply of books is: Q_s = 5P
Refer to Scenario 2.1. If P = $15, which of the following is true?

A) There is a surplus equal to 30.
B) There is a shortage equal to 30.
C) There is a surplus, but it is impossible to determine how large.
D) There is a shortage, but it is impossible to determine how large.

Question 25

Figure 2.2.1
Refer to Figure 2.2.1 above. At a price of $1.50, there is:

A) an excess of quantity demanded over quantity supplied.
B) an excess of quantity supplied over quantity demanded.
C) an alternative equilibrium between supply and demand.
D) a surplus of coffee in the market.

Question 26

As long as the actual market price exceeds the equilibrium market price, there will be:

A) downward pressure on the market price.
B) upward pressure on the market price.
C) no purchases made.
D) Both A and C are correct.
E) Both B and C are correct.

Question 27

The battery packs used in electric and hybrid automobiles are one of the largest cost components for manufacturing these cars. As the price of these batteries decline, we expect that the:

A) supply curve for electric and hybrid autos will shift rightward.
B) supply curve for electric and hybrid autos will shift leftward.
C) demand curve for electric and hybrid autos will shift rightward.
D) demand curve for electric and hybrid autos will shift leftward.

Question 28

Scenario 2.1:
The demand for books is: Q_d = 120 - P
The supply of books is: Q_s = 5P
Refer to Scenario 2.1. If P = $25, which of the following is true?

A) There is a surplus equal to 30.
B) There is a shortage equal to 30.
C) There is a shortage, but it is impossible to determine how large.
D) There is a surplus, but it is impossible to determine how large.

Question 29

Figure 2.1.2
Refer to Figure 2.1.2. The price of coffee is currently $6.00. and quantity demanded is 7 million pounds. Then there is a notable increase in the preference for coffee over other substitutes, like tea. Which move best describes this change?

A) A move from B to A
B) A move from B to C
C) A move from B to A, and then to C
D) A move from B to C, and then to A

Question 30

When the current price is above the market-clearing level we would expect:

A) quantity demanded to exceed quantity supplied.
B) quantity supplied to exceed quantity demanded.
C) a shortage.
D) greater production to occur during the next period.

Question 31

Scenario 2.1:
The demand for books is: Q_d = 120 - P
The supply of books is: Q_s = 5P
Refer to Scenario 2.1. What is the equilibrium price of books?

A) 5
B) 10
C) 15
D) 20
E) none of the above

Question 32

If the actual price were below the equilibrium price in the market for bread, a:

A) surplus would develop that cannot be eliminated over time.
B) shortage would develop, which market forces would eliminate over time.
C) surplus would develop, which market forces would eliminate over time.
D) shortage would develop, which market forces would tend to exacerbate.

Question 33

Rare earth metals are used to manufacture some important electronic components in popular products like cell phones. These metals are not really rare, but they are expensive to extract from the ground. What happens to the market for the rare earth metals if these extraction costs increase?

A) Demand curve shifts leftward
B) Demand curve shifts rightward
C) Supply curve shifts leftward
D) Supply curve shifts rightward

Question 34

Scenario 2.1:
The demand for books is: Q_d = 120 - P
The supply of books is: Q_s = 5P
Refer to Scenario 2.1. If P = $25, which of the following is true?

A) Quantity supplied is greater than quantity demanded.
B) Quantity supplied is less than quantity demanded.
C) Quantity supplied equals quantity demanded.
D) There is a shortage.

Question 35

Suppose the equilibrium price of milk is $3 per gallon but the federal government sets the market price at $4 per gallon. The market mechanism will force the milk price back down to $3 per gallon unless the government:

A) rations the excess demand for milk among consumers.
B) buys the excess supply of milk and removes it from the market.
C) Both A and B are plausible actions.
D) The government cannot maintain the price above the equilibrium level.

Question 36

The current market price for good X is below the equilibrium price, and then the demand curve for X shifts rightward. What is the likely outcome of the demand shift?

A) The surplus increases.
B) The surplus decreases.
C) The shortage increases.
D) The shortage decreases.

Question 37

Suppose the quantity of nursing services demanded exceeds the quantity of nursing services supplied. The nursing wage rate will:

A) decrease.
B) increase.
C) not change.
D) none of the above

Question 38

Figure 2.1.2
Refer to Figure 2.1.2. If the price of coffee decreases, from $7.50 to $6.00 per pound, which of the following will occur?

A) The quantity demanded of coffee will increase, from 6 to 7 million pounds per year.
B) The demand curve will shift to the right and the quantity demanded will increase to 10 million pounds per year.
C) Both moves, from A to B and then from B to C, will occur simultaneously.
D) It is possible that the market demand will show the move fro A to B, or that it moves directly from A to C.

Question 39

Figure 2.2.1
Refer to Figure 2.2.1 above. If the price of $1.50 is a price imposed by the government, we can call it:

A) a price floor.
B) a price ceiling.
C) a socially optimal equilibrium price.
D) a fiscal price.

Question 40

Suppose there is currently a surplus of wheat on the world market. The problem of excess supply may be removed from the market by:

A) lowering the market price.
B) shifting the supply curve leftward.
C) shifting the demand curve leftward.
D) Both A and B are plausible actions.

Question 41

Figure 2.3.3
Refer to Figure 2.3.3 above. Which of the two panels best describes the trend in college costs from 1970 to 2016?

A) Panel (a)
B) Panel (b)
C) Both panels
D) Neither panel

Question 42

Example 2.2 in the textbook explains the source of wage inequality in the United States. In terms of supply and demand, the wage of skilled workers has:

A) decreased, because the supply has increased more than the increase in demand for those workers.
B) decreased, because the demand has decreased and the supply has increased.
C) increased, because the demand has increased faster than the increase in supply.
D) increased, because the demand has increased, while the supply has decreased.

Question 43

Which of the following would cause an unambiguous decrease in the real price of DVD players?

A) A shift to the right in the supply curve for DVD players and a shift to the right in the demand curve for DVD players
B) A shift to the right in the supply curve for DVD players and a shift to the left in the demand curve for DVD players
C) A shift to the left in the supply curve for DVD players and a shift to the right in the demand curve for DVD players
D) A shift to the left in the supply curve for DVD players and a shift to the left in the demand curve for DVD players

Question 44

From 1970 to 2017, the real price of eggs decreased and the total annual consumption of eggs decreased. Which of the following would cause an unambiguous decrease in the real price of eggs and an unambiguous decrease in the quantity of eggs consumed?

A) A shift to the right in the supply curve for eggs and a shift to the right in the demand curve for eggs
B) A shift to the left in the supply curve for eggs and a shift to the right in the demand curve for eggs
C) A shift to the left in the supply curve for eggs and a shift to the left in the demand curve for eggs
D) none of the above

Question 45

From 1970 to 2017, the real price of a college education increased, and total enrollment increased. Which of the following could have caused this increase in price and enrollment?

A) A shift to the right in the supply curve for college education and a shift to the left in the demand curve for college education
B) A shift to the left in the supply curve for college education and a shift to the right in the demand curve for college education
C) A shift to the left in the supply curve for college education and a shift to the left in the demand curve for college education
D) none of the above

Question 46

Figure 2.2.2
Refer to Figure 2.2.2 above. An imposed price of $2.25 can be called:

A) a price ceiling.
B) a price floor.
C) a consumer-friendly price.
D) a price of equilibrium difference.

Question 47

Figure 2.3.1
Refer to Figure 2.3.1. In Example 2.4, the textbook describes the impact of 9/11 on the real estate market in New York city. How does the sketch in figure 2.3.1 adapt to the described scenario?

A) Demand shifted from D₁ to D₂ and supply shifted from S₁ to S₂.
B) Demand shifted from D₁ to D₂ and supply shifted from S₂ to S₁.
C) Demand shifted from D₂ to D₁ and supply shifted from S₁ to S₂.
D) Demand shifted from D₂ to D₁ and supply shifted from S₂ to S₁.

Question 48

The inverse demand curve for product X is given by:
P_X = 25 - 0.005Q + 0.15P_Y,
where P_X represents price in dollars per unit, Q represents rate of sales in pounds per week, and P_Y represents selling price of another product Y in dollars per unit. The inverse supply curve of product X is given by: P_X = 5 + 0.004Q.
a. Determine the equilibrium price and sales of X. Let P_Y = $10.
b. Determine whether X and Y are substitutes or complements.

Question 49

By 2020, automobile market analysts expect that the demand for electric autos will increase as buyers become more familiar with the technology. However, the costs of producing electric autos may increase because of higher costs for inputs (e.g., rare earth elements), or they may decrease as the manufacturers learn better assembly methods (i.e., learning by doing). What is the expected impact of these changes on the equilibrium price and quantity for electric autos?

A) Unambiguously higher equilibrium price and quantity
B) Unambiguously higher price, and equilibrium quantity may be higher or lower
C) Unambiguously higher quantity, and equilibrium price may be higher or lower
D) We cannot form any unambiguous expectations for either price or quantity.

Question 50

Which of the following will cause the price of beer to rise?

A) A shift to the right in the demand curve for beer
B) A shift to the left in the supply curve of beer
C) both A and B
D) none of the above

Question 51

From 1970 to 2017, the real price of eggs decreased. Which of the following would cause an unambiguous decrease in the real price of eggs?

A) A shift to the right in the supply curve for eggs and a shift to the right in the demand curve for eggs
B) A shift to the right in the supply curve for eggs and a shift to the left in the demand curve for eggs
C) A shift to the left in the supply curve for eggs and a shift to the right in the demand curve for eggs
D) A shift to the left in the supply curve for eggs and a shift to the left in the demand curve for eggs

Question 52

In example 2.3, the textbook shows a surprising trend in the relationship between the price of copper and the consumption of copper over time. From 1880 to 2016, which of the following ocurred?

A) The consumption of copper remained virtually unchanged, yet the price increases substantially.
B) The price of copper reflected precisely the market prediction that as consumption rose steadily over time, the price of copper rose at almost exactly the same rate.
C) The price of copper remained virtually unchanged while the consumption of copper rose exponentially.
D) While the price of copper rose substantially, the consumption of copper actually declined.

Question 53

The daily demand for hotel rooms on Manhattan Island in New York is given by the equation The daily supply of hotel rooms on Manhattan Island is given by the equation Diagram these demand and supply curves in the price and quantity space. What is the equilibrium price and quantity of hotel rooms on Manhattan Island?

Question 54

Figure 2.3.1
The effect of the September 11 attacks on the World Trade Center on the market for office space in downtown Manhattan was that both the equilibrium price and the equilibrium quantity fell. What is the most likely explanation for this?

A) Supply and demand both shifted left, and the magnitude of the demand shift was greater.
B) Supply and demand both shifted left, and the magnitude of the supply shift was greater.
C) Supply shifted left, demand shifted right, and the magnitude of the demand shift was greater.
D) Supply shifted left, demand shifted right, and the magnitude of the supply shift was greater.

Question 55

Figure 2.3.2
Figure 2.3.2 above is a reproduction of Figure 2.9 in the textbook, which describes the market for mineral resources across time. The downward-sloping line that crosses the equilibrium points is called:

A) the market decline curve.
B) the market rise path.
C) the long-run path of price and consumption.
D) the industry supply curve.

Question 56

Suppose a new discovery in computer manufacturing has just made computer production cheaper. Also, the popularity and usefulness of computers continues to grow. Use Supply and Demand analysis to predict how these shocks will affect equilibrium price and quantity of computers. Is there enough information to determine if market prices will rise or fall? Why?

Question 57

Example 2.2 in the textbook explains the source of wage inequality in the United States. In terms of supply and demand, the wage of unskilled workers has:

A) decreased, because the supply has increased more than the increase in demand for those workers.
B) decreased, because the demand has decreased, and the supply has increased.
C) increased, because the demand has increased faster than the increase in supply.
D) increased, because the demand has increased, while the supply has decreased.

Question 58

Figure 2.2.2
Refer to Figure 2.2.2 above. If the price of $2.25 is an artificial price imposed by the government, and the government is expected to remove it, what will happen in this market?

A) There will a tendency for the price to be higher than the imposed price.
B) There will a tendency for the new price to be lower than the imposed price.
C) The new price would not be expected to by any different than the already imposed price.
D) The new price will tend to fluctuate above and below the equilibrium price of $2.00.

Question 59

Suppose that due to more stringent environmental regulation it becomes more expensive for steel production firms to operate. Also, recent technological advances in plastics has reduced the demand for steel products. Use Supply and Demand analysis to predict how these shocks will affect equilibrium price and quantity of steel. Can we say with certainty that the market price for steel will fall? Why?

Question 60

We observe that both the price of and quantity sold of golf balls are rising over time. This is due to:

A) continual improvements in the technology used to produce golf balls.
B) increases in the price of golf clubs over time.
C) decreases in membership fees for country clubs with golf facilities.
D) more stringent professional requirements on the quality of golf balls requiring producers to use more expensive raw materials.

Question 61

Figure 2.4.1
Refer to Figure 2.4.1. Between points E and F, demand is:

A) completely inelastic.
B) inelastic, but not completely inelastic.
C) unit elastic.
D) elastic, but not infinitely elastic.
E) infinitely elastic.

Question 62

The cross-price elasticity of demand refers to:

A) a change in the demanded for two goods, following a change in the price of one good.
B) the substitution of one good for another as the prices of two goods change.
C) the value of price elasticity at which supply crosses demand.
D) the percentage change in the quantity demanded of one good resulting from a 1-percent increase in the price of another good.

Question 63

Which of the following represents the income elasticity of demand?

A)
B) +

C) ×

D) -

Question 64

Figure 2.4.1
Refer to Figure 2.4.1. Between two points near D, demand is:

A) completely inelastic.
B) inelastic, but not completely inelastic.
C) unit elastic.
D) elastic, but not infinitely elastic.
E) infinitely elastic.

Question 65

Figure 2.4.1
Refer to Figure 2.4.1. At point A, demand is:

A) completely inelastic.
B) inelastic, but not completely inelastic.
C) unit elastic.
D) elastic, but not infinitely elastic.
E) infinitely elastic.

Question 66

Suppose the cable TV industry is currently unregulated. However, due to complaints from consumers that the price of cable TV is too high, the legislature is considering placing a price ceiling on cable TV below the current equilibrium price. Assuming the government does make this price ceiling law, please construct a diagram that shows the impact of this law on the cable TV market, and please briefly explain the effects on market prices and quantities with supply and demand analysis. Also, if the cable TV company is worried about disgruntling customers, the company may introduce a different type of programming that is cheaper for the company to provide yet is equally appealing to customers. What would be the effects of this action?

Question 67

Figure 2.4.2
Refer to Figure 2.4.2 above. Which of the following best describes de demand curve in this figure?

A) Demand is infinitely elastic.
B) Demand is completely inelastic.
C) Demand becomes more inelastic the lower the price.
D) Demand becomes more elastic the lower the price.

Question 68

Suppose that the resale of tickets to professional football games is illegal in Missouri. Due to the high demand for Chiefs (who play in Kansas City, Missouri) tickets there is a shortage of tickets at the current ticket price. Given that the Chiefs will not raise the price at which they sell the tickets, what would be the result of allowing tickets to be resold in a secondary market at whatever price the market would support? If speculators entered the market and began buying tickets directly from the Chiefs in hopes of reselling the tickets later, what would happen to the line outside of the ticket offices when the tickets are initially sold?

Question 69

Historically, investors have considered gold commodities to be a good investment to preserve wealth in times of inflation. If investors are no longer worried about inflation and gold demand decreases, what do you expect will happen to gold prices? How would your answer change if you learn that a recent gold mine discovery will increase the supply of gold?

Question 70

Elasticity measures:

A) the slope of a demand curve.
B) the inverse of the slope of a demand curve.
C) the percentage change in one variable in response to a one percent increase in another variable.
D) sensitivity of price to a change in quantity.

Question 71

The income elasticity of demand refers to:

A) a change in income following a change in quantity demanded.
B) the substitution of one good for another as income changes.
C) the percentage change in quantity demanded resulting from a 1-percent increase in income.
D) the change in income required for quantity demanded to change by 1%.

Question 72

The currency used by the Confederate States of America during its brief existence from 1861 to 1865 has become a collector's item today. The Confederate Currency supply is perfectly inelastic. As the demand for the collectible increases and some of the old currency is destroyed or no longer of value as a collectible, what happens to the market price?

Question 73

Figure 2.4.1
Refer to Figure 2.4.1. Between points B and C, demand is:

A) small.
B) inelastic, but not completely inelastic.
C) unit elastic.
D) elastic, but not infinitely elastic.
E) infinitely elastic.

Question 74

Figure 2.4.3
Refer to Figure 2.4.3 above. The price elasticity of demand along this demand curve is equal to:

A) whatever the value of the price is.
B) infinity.
C) zero.
D) an undetermined value.

Question 75

Figure 2.4.1
Refer to Figure 2.4.1. At point E, demand is:

A) completely inelastic.
B) inelastic, but not completely inelastic.
C) unit elastic.
D) elastic, but not infinitely elastic.
E) infinitely elastic.

Question 76

Figure 2.4.3
Refer to Figure 2.4.3 above. Which of the following best describes de demand curve in this figure?

A) Demand is infinitely elastic.
B) Demand is completely inelastic.
C) Demand becomes more inelastic the lower the price.
D) Demand becomes more elastic the lower the price.

Question 77

Which of the following represents the price elasticity of demand?

A)
B) +

C) ×

D) -

Question 78

Along any downward-sloping straight-line demand curve:

A) both the price elasticity and slope vary.
B) the price elasticity varies, but the slope is constant.
C) the slope varies, but the price elasticity is constant.
D) both the price elasticity and slope are constant.

Question 79

Figure 2.4.1
Refer to Figure 2.4.1. Which of the following statements about the demand curve in the figure?

A) Demand is infinitely elastic.
B) Demand is completely inelastic.
C) Demand becomes more inelastic as price declines.
D) Demand becomes more elastic as price declines.

Question 80

Figure 2.4.2
Refer to Figure 2.4.2 above. Fill in the blanks. For any price higher than P*, the quantity demanded ________, while for any price lower than P*, the quantity demanded ________.

A) drops to zero; increases without limit
B) drops to zero; remains constant
C) increases without limit; does not exist
D) does not exist; is unpredictable