Figure 3-6
-Refer to Figure 3-6. The figure above represents the market for canvas tote bags. Assume that the market price is $35. Which of the following statement is true?
A) There is a surplus that will cause the price to decrease; quantity demanded will then increase and quantity supplied will decrease until the price equals $25.
B) There is a surplus that will cause the price to decrease; quantity supplied will then increase and quantity demanded will decrease until the price equals $25.
C) There will be a surplus that will cause the price to decrease; demand will then increase and supply will decrease until the price equals $25.
D) There is a surplus that will cause the price to increase; quantity demanded will then decrease and quantity supplied will increase until the price equals $25.

Question

Figure 3-6 
-Refer to Figure 3-6. The figure above represents the market for canvas tote bags. Assume that the market price is $35. Which of the following statement is true?
A) There is a surplus that will cause the price to decrease; quantity demanded will then increase and quantity supplied will decrease until the price equals $25. 
B) There is a surplus that will cause the price to decrease; quantity supplied will then increase and quantity demanded will decrease until the price equals $25. 
C) There will be a surplus that will cause the price to decrease; demand will then increase and supply will decrease until the price equals $25. 
D) There is a surplus that will cause the price to increase; quantity demanded will then decrease and quantity supplied will increase until the price equals $25.

Quizplus · Accepted Answer

When there is a surplus, the price tends to decrease. As the price decreases, the quantity demanded increases and the quantity supplied decreases until the market reaches equilibrium at a lower price, in this case, $25.

Figure 3-6 -Refer to Figure 3-6. the Figure Above Represents the Market