In the following question you are asked to determine, other things equal, the effects of a given change in a determinant of demand or supply for product X upon (1) the demand (D) for, or supply (S) of, X; (2) the equilibrium price (P) of X; and (3) the equilibrium quantity (Q) of X.Removing the subsidy placed on product X years ago will

A) decrease S, increase P, and decrease Q.
B) increase S, increase P, and increase Q.
C) decrease S, increase P, and increase Q.
D) increase D, decrease P, and increase Q.

Question

Jacquesa Battle · Accepted Answer

Final Answer : A, Explanation :  Removing the subsidy on product X will make it more expensive for producers to produce, leading to a decrease in supply (S). This decrease in supply, with demand remaining constant, will lead to an increase in the equilibrium price (P) of X. As the price increases, the quantity demanded (Q) will decrease, following the law of demand.

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