How will the demand and supply of a product be affected if both producers and consumers expect the future price of a product will be higher than at present?
A)It will cause an increase in demand but a decrease in supply.
B)It will cause an increase in both the demand and supply.
C)It will cause a decrease in both the demand and supply.
D)It will cause an increase in supply but will have no effect on demand.
E)It will cause an increase in supply but a decrease in demand.

Question

Quizplus · Accepted Answer

Both producers and consumers expecting higher future prices than the present indicates that there is a perception of scarcity or limited availability in the future. This expectation will lead to an increase in demand as consumers rush to purchase the product before the price goes up. However, producers may decrease their current supply in anticipation of higher prices in the future, leading to a decrease in supply. Therefore, the demand for the product will increase while the supply decreases, resulting in a shortage and increased prices in the short term.

How Will the Demand and Supply of a Product Be