Answer to Question #221286 in Microeconomics for Mia khalifa

Question

Suppose the market for almonds is in equilibrium. Consumers are expecting that the price of almonds will increase in future in the market. If all other variable are held constant, what would you expect for the new price and quantity of almonds? 

Answer 1

In the figure below, the market for almonds is in equilibrium at point w. If consumers anticipate the price of almonds to rise in the future, they will increase their demand now. The increase in demand will result in an increase in both equilibrium price and quantity. In the figure below, the rise in demand for almonds is exhibited by the rightward change in the demand curve from D1 to D2. The equilibrium moves to point k, and the equilibrium price increases from P0 to P1 and equilibrium quantity from Q0 to Q1.