The figure given below represents the equilibrium in the market for bicycles under different demand and supply situations. The vertical axis in each panel shows the price of bikes.Figure 3.2

-Refer to Figure 3.2. Which of the following panels represents the equilibrium situation in the bicycle market, if there were an increase in the price of metal used in the production of bicycles?
A)Panel A
B)Panel B
C)Panel C
D)Panel D
E)Panel E

Question

The figure given below represents the equilibrium in the market for bicycles under different demand and supply situations. The vertical axis in each panel shows the price of bikes.Figure 3.2
 
-Refer to Figure 3.2. Which of the following panels represents the equilibrium situation in the bicycle market, if there were an increase in the price of metal used in the production of bicycles?
A)Panel A 
B)Panel B 
C)Panel C 
D)Panel D 
E)Panel E

Quizplus · Accepted Answer

An increase in the price of metal used in the production of bicycles would increase the production costs for manufacturers, leading to a decrease in supply. Panel C shows a leftward shift of the supply curve, indicating a decrease in supply, which is consistent with the effects of an increase in production costs.

The Figure Given Below Represents the Equilibrium in the Market