Suppose that is the price per unit (in dollars) of widgets which will induce producers to supply q thousand widgets to the market, and suppose that is the price per unit at which consumers will buy q thousand units. If and , what do you predict about the future selling price of widgets (currently at $10)?
A)It will rise.
B)It will fall.

Question

Suppose that  is the price per unit (in dollars) of widgets which will induce producers to supply q thousand widgets to the market, and suppose that  is the price per unit at which consumers will buy q thousand units. If  and  , what do you predict about the future selling price of widgets (currently at $10)?
A)It will rise. 
B)It will fall.

Quizplus · Accepted Answer

The fact that the price at which consumers are willing to buy the widgets is higher than the price at which producers are willing to supply them suggests that there is likely to be an excess demand for widgets at the current price level of $10. This excess demand is likely to exert upward pressure on the selling price of widgets in the future, since producers will be able to charge more and still find willing buyers. Therefore, the best choice is A, that the price of widgets will rise.

Suppose That Is the Price Per Unit (In Dollars)