The world price of a commodity will settle at the level where
A)supply and demand are equal within each country.
B)the excess demand of the importing country is equal to the excess supply of the exporting country.
C)the excess demand in the exporting country is equal to the excess demand in the importing country.
D)there is no excess demand in the exporting country.

Question

Quizplus · Accepted Answer

The world price of a commodity will settle at the level where the excess demand of the importing country is equal to the excess supply of the exporting country. This is because when the excess demand in the importing country is high, the price will increase, which will result in more supply from the exporting countries. Eventually, the excess demand of the importing country will be met by the excess supply of the exporting country, leading to a stable world price. Therefore, option B is the best choice.

The World Price of a Commodity Will Settle at the Level