When the price of a good falls,the price is transmitting information indicating that the good has become relatively
A) scarcer.
B) less scarce.
C) more plentiful in demand.
D) b and c

Question

Quizplus · Accepted Answer

When the price of a good falls, it indicates that the good has become relatively less scarce. This is because the decrease in price implies that there is a surplus of the good in the market. If the good were scarcer, the price would increase as consumers compete to obtain it. Option C is incorrect because falling prices do not necessarily indicate that demand has increased; demand could remain the same while supply increases, causing a decrease in price. Option D is also incorrect because while falling prices could be a result of both increased supply and increased demand, the primary reason for falling prices is usually an increase in supply.

When the Price of a Good Falls,the Price Is Transmitting