Refer to the information provided in Figure 5.6 below to answer the question that follows. Figure 5.6
-Refer to Figure 5.6. The market is initially in equilibrium at Point A and supply shifts from S1 to S2. Which of the following statements is true?
A) Price will still serve as a rationing device causing quantity supplied to exceed 12 thousand pizzas.
B) There is no need for price to serve as a rationing device in this case because the new equilibrium quantity exceeds the original equilibrium quantity.
C) Price will still serve as a rationing device causing quantity demanded to fall from 12 to 10 thousand pizzas.
D) The market cannot move to a new equilibrium until there is also a change in demand.

Question

Refer to the information provided in Figure 5.6 below to answer the question that follows.  Figure 5.6
-Refer to Figure 5.6. The market is initially in equilibrium at Point A and supply shifts from S1 to S2. Which of the following statements is true?
A) Price will still serve as a rationing device causing quantity supplied to exceed 12 thousand pizzas. 
B) There is no need for price to serve as a rationing device in this case because the new equilibrium quantity exceeds the original equilibrium quantity. 
C) Price will still serve as a rationing device causing quantity demanded to fall from 12 to 10 thousand pizzas. 
D) The market cannot move to a new equilibrium until there is also a change in demand.

Quizplus · Accepted Answer

When supply shifts from S1 to S2, the new equilibrium point will be at a lower quantity and a higher price (Point B). Price will still serve as a rationing device causing quantity demanded to fall from 12 to 10 thousand pizzas. Therefore, option C is the correct answer. Option A is incorrect as it suggests that quantity supplied would exceed the new equilibrium quantity. Option B is incorrect as it suggests that price would not serve as a rationing device, which is not true. Option D is incorrect as changes in supply can cause a shift in equilibrium without a change in demand.

Refer to the Information Provided in Figure 5