Figure: Price Adjustment Refer to the figure. If the price of the product is $14, there is a:
A) shortage of 30 units of the product, and the price will rise to $16.
B) surplus of 20 units of the product, and the price will rise to $16.
C) shortage of 50 units of the product, and the price will rise to $16.
D) surplus of 40 units of the product, and the price will rise to $16.

Question

Figure: Price Adjustment  Refer to the figure. If the price of the product is $14, there is a:
A) shortage of 30 units of the product, and the price will rise to $16. 
B) surplus of 20 units of the product, and the price will rise to $16. 
C) shortage of 50 units of the product, and the price will rise to $16. 
D) surplus of 40 units of the product, and the price will rise to $16.

Quizplus · Accepted Answer

At a price of $14, the quantity demanded is 70 and the quantity supplied is only 20, resulting in a shortage of 50 units. To clear the market, the price must rise to $16, which will increase the quantity supplied to 70 and decrease the quantity demanded to 40, resulting in equilibrium. Therefore, choice C is the best option as it correctly identifies the shortage of 50 units and the resulting price increase to $16.

Figure: Price Adjustment Refer to the Figure