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

Panel C represents the equilibrium situation in the bicycle market following an increase in the price of metal used in the production of bicycles. This is because the increase in the cost of metal, a key input in bicycle production, would lead to a decrease in the supply of bicycles (the supply curve shifts to the left), assuming demand remains constant. This results in a higher equilibrium price and a lower equilibrium quantity, as depicted in Panel C.

The Figure Given Below Represents the Equilibrium in the Market