A set of superhero figurines was very popular during the holiday season. Demand for these superhero figurines dropped significantly after the holidays. A surplus of superhero figurines now lines the shelves of the toy stores. In the absence of government intervention, what is likely to occur?
a.) the high price brought about by an increase in demand will incentivize producers to decrease the quantity of superhero figurines supplied to the market.
b.) the high price brought about by an increase in demand will incentivize producers to increase the quantity of superhero figurines supplied to the market.
c.) the low price brought about by a decrease in demand will incentivize producers to increase the quantity of superhero figurines supplied to the market.
d.) the low price brought about by a decrease in demand will incentivize producers to decrease the quantity of superhero figurines supplied to the market.
The correct answer is c.) the low price brought about by a decrease in demand will incentivize producers to increase the quantity of superhero figurines supplied to the market.
In the absence of government intervention, the surplus of superhero figurines on the shelves indicates that demand for these figurines has decreased significantly after the holiday season. As a result, toy stores will need to lower the price of the figurines in order to entice consumers to purchase them. This decrease in price will create an incentive for producers to increase the quantity of superhero figurines supplied to the market because they want to sell their inventory and avoid losses.
Producers monitor market demand and respond to changes in price signals. When demand decreases and prices drop, producers often increase the quantity of goods supplied to the market in order to try and recoup their costs and avoid losses. In this case, the surplus of superhero figurines will likely lead producers to increase their supply to meet the lower demand and sell their inventory.