Figure 14-9

-Refer to Figure 14-9.When a firm in a competitive market,like the one depicted in panel (a),observes market price rising from P₁ to P₂,what is most likely the cause

Question

Figure 14-9
 
-Refer to Figure 14-9.When a firm in a competitive market,like the one depicted in panel (a),observes market price rising from P₁ to P₂,what is most likely the cause

Quizplus · Accepted Answer

An increase in market demand from Demand0 to Demand1 would cause the market price to rise from P₁ to P₂, as shown in the diagram. This would occur if there was an increase in consumer preference for the good or service, an increase in consumer income, or a decrease in the price of a substitute good. The entrance or exit of firms, or an increase in market supply, would not necessarily cause an increase in price in a competitive market.

Figure 14-9 -Refer to Figure 14-9.When a Firm in a Competitive Market,like