Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
A decrease in the price of coffee leading to an increase in coffee consumption.
B
A rise in the cost of raw materials causing manufacturers to reduce the quantity of goods supplied.
C
An increase in consumer income resulting in higher demand for luxury cars while manufacturers are unable to increase production.
D
An increase in the number of coffee shops leading to more people buying coffee, despite stable coffee prices.
Understanding the Answer
Let's break down why this is correct
Answer
The best illustration is when a new, highly‑anticipated gadget is released, causing many people to want it right away while the manufacturer struggles to get enough of a critical component. The surge in consumer interest pushes the demand curve to the right, making buyers willing to pay more. At the same time, the shortage of the component shifts the supply curve leftward, so fewer units are available. Because both curves move, the equilibrium price climbs higher than it would if only demand or only supply had changed. This shows how a rise in demand and a drop in supply together raise the market price.
Detailed Explanation
When people earn more, they want more luxury cars. Other options are incorrect because This example only shows a price drop leading to more coffee use; Here only supply changes because raw material cost goes up.
Key Concepts
factors affecting demand
factors affecting supply
Topic
Demand and Supply Basics
Difficulty
medium level question
Cognitive Level
understand
Practice Similar Questions
Test your understanding with related questions
1
Question 1In the context of price elasticity of demand, which of the following scenarios best illustrates a unitary elastic demand, particularly when contrasting necessity and luxury goods?
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2
Question 2Which of the following statements correctly describe the relationship between demand and supply in a market economy? (Select all that apply)
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3
Question 3Which of the following scenarios best illustrates the law of demand?
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4
Question 4Demand : Price :: Supply : ?
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5
Question 5Which of the following factors can cause a shift in the demand curve for a product? Select all that apply.
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6
Question 6Which of the following factors can cause a shift in the supply curve for a product? Select all that apply.
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