Refer to the information provided in Figure 4.2 below to answer the question(s) that follow.
Refer to Figure 4.2. The market is initially in equilibrium at the intersection of
S
2 and
D
, and supply shifts from
S
2 to
S
1. Which of the following statements is
true?
◦ Price will still serve as a rationing device causing quantity demanded to rise from 8 to 11 soft pretzels.
◦ There is no need for price to serve as a rationing device in this case because the new equilibrium quantity is lower than the original equilibrium quantity.
◦ Price will still serve as a rationing device causing quantity supplied to fall from 8 to 4 soft pretzels.
◦ The market cannot move to a new equilibrium until there is also a change in supply.
Caravaneer on a camel, China. Tang dynasty, (618–907). Polychrome terra-cotta figure.
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