📚 Learning Guide
Analyzing Market Equilibrium Changes
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An increase in demand while supply decreases is to market price rising as an increase in consumer confidence is to what?

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Learning Path
Learning Path

Question & Answer
1
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2
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3
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4
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Choose the Best Answer

A

Increased production capacity

B

Increased consumer spending

C

Decreased market entry barriers

D

Decreased interest rates

Understanding the Answer

Let's break down why this is correct

Answer

When demand increases while supply decreases, there are more people wanting a product but fewer products available, which causes the market price to rise. Similarly, when consumer confidence increases, people feel more secure about their finances and are more willing to spend money. This increased willingness to spend usually leads to a rise in demand for goods and services. As demand increases due to higher consumer confidence, prices tend to rise as sellers adjust to the greater interest from buyers. For example, if more people believe they will keep their jobs, they might buy more cars, leading to higher prices for vehicles.

Detailed Explanation

When people feel confident about the economy, they tend to spend more money. Other options are incorrect because Some might think that more production means more spending; People might confuse easier market entry with consumer confidence.

Key Concepts

Market Equilibrium
Demand and Supply Dynamics
Consumer Behavior
Topic

Analyzing Market Equilibrium Changes

Difficulty

medium level question

Cognitive Level

understand

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