The market clearing price of corn has just increased. Which of the following could have caused this change?
A) a reduction in demand
B) a reduction in supply
C) an increase in quantity demanded
D) an increase in quantity supplied

Question

Quizplus · Accepted Answer

An increase in market clearing price and a reduction in supply go hand in hand. When supply decreases, the quantity of corn available in the market decreases. Since demand remains constant, the market price of corn increases to reach a new equilibrium where the quantity demanded equals the reduced quantity supplied. A reduction in demand (Option A) would lead to a decrease in price, while an increase in quantity demanded (Option C) and an increase in quantity supplied (Option D) would shift the supply and demand curves, with uncertain effects on price.

The Market Clearing Price of Corn Has Just Increased