Question:
Last year, 15 million tons of corn were sold for Rs. 30 000 per ton, and in this year 15 million tons of corn were sold for Rs. 25 000 per ton. Which of the following changes in demand and supply could have caused this outcome?
(1) Demand: Increase; Supply: Increase
(2) Demand: Increase; Supply: Decrease
(3) Demand: Decrease; Supply: Decrease
(4) Demand: Decrease; Supply: Increase
(5) Demand: Increase; Supply: No change
Correct Answer:
(4)
Answer Explanation:
The equilibrium quantity remained the same (15 million) while the price decreased (from 30k to 25k). This only happens if Demand decreases (shifting left, lowering price and quantity) AND Supply simultaneously increases (shifting right, lowering price but raising quantity). The quantity effects cancel out, but both push the price down.
Topic: Demand & Supply Year: 2022
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