Suppose the market for the magazine is in equilibrium. Some students insist on raising the cover price by $1 and printing the same quantity. What is likely to happen?
A. The demand for the magazine will go up.
B. There will be a shortage of 150 magazines.
C. There will be a surplus of 100 magazines.
Look at a typical demand curve. As price goes up, demand goes down. You will not sell as many magazines at the higher price, probably.
Huh???
Don't you understand Damon's explanation?
That's right, Krystal/Anonymous.
so the demand for magazine will not go up because the price is too high.
Right.
so there for there will be a surplus of 100 magazines?
To determine what is likely to happen if the cover price of a magazine is raised by $1 while maintaining the same quantity printed, we need to analyze the effects on demand and supply.
First, let's understand the concept of equilibrium. Equilibrium is the point where the quantity demanded by consumers is equal to the quantity supplied by producers. At this point, there is no excess demand (shortage) or excess supply (surplus).
Now, let's consider the effects of raising the cover price by $1:
1. Demand: Typically, when the price of a good or service increases, the quantity demanded tends to decrease. This is known as the law of demand. In this scenario, if the cover price is raised by $1, it is likely that some consumers might find the magazine less affordable or attractive, leading to a decrease in demand.
2. Supply: The scenario states that the same quantity will be printed even after the price increase. Assuming the quantity supplied remains constant, there will be no change in supply.
Considering the likely outcomes based on these effects, we can eliminate options A and B:
A. The demand for the magazine will go up: Since raising the price is likely to decrease demand, it is unlikely that the demand for the magazine will go up.
B. There will be a shortage of 150 magazines: Since raising the price is expected to decrease demand, there is no indication that a shortage of 150 magazines would occur.
This leaves us with option C:
C. There will be a surplus of 100 magazines: This is the likely outcome if the same quantity is printed while demand decreases due to the price increase. With a decreased demand and unchanged supply, a surplus of magazines would be expected.
Therefore, the most likely outcome if the cover price is raised by $1 while printing the same quantity is that there will be a surplus of 100 magazines.