At a price of $2,000 per unit, the demand for Rancho 60 mountain bikes from Cloyd's Inc. is 300 units, which is same as the number of bikes manufactured every year. If the marketing managers at Cloyd's Inc. decide to sell each bike at a price lower than $2,000 per unit, _____.
A)a shortage of bikes will be created
B)the number of bikes produced will increase drastically
C)an inelastic demand for the bikes will be created
D)the demand for and the supply of the bikes will attain equilibrium

Question

Quizplus · Accepted Answer

Since the current demand for the bikes is 300 units at a price of $2,000 per unit, if the price is lowered below $2,000, the demand for the bikes is likely to increase. However, since Cloyd's Inc. only manufactures 300 units every year, a shortage of bikes will be created. This means that the number of people who want to buy the bikes at the lower price will exceed the number of bikes available, resulting in a shortage.

At a Price of $2,000 Per Unit, the Demand for Rancho