If both buyers and sellers expect the price of a commodity to rise in the future, it is likely that equilibrium:
A) price will fall with little change in equilibrium quantity.
B) price will rise with little change in equilibrium quantity.
C) quantity will fall with little change in equilibrium price.
D) quantity will rise with little change in equilibrium price.

Question

Quizplus · Accepted Answer

When both buyers and sellers expect the price of a commodity to rise in the future, buyers are likely to increase their demand now to avoid higher prices later, and sellers may hold back supply to sell at higher prices in the future. This leads to an increase in current demand and a decrease in current supply, causing the equilibrium price to rise with little change in equilibrium quantity.

If Both Buyers and Sellers Expect the Price of a Commodity