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WAEC Economics 2020 Question 16

Question 16

Price Determination

If a beef market is in equilibrium at $4.00 per kg, an increase in price to $6.00 per kg may cause

  1. A.surplus in the market.
  2. B.shortage in the market.
  3. C.black market to come into operation.
  4. D.rationing to be introduced.
Show the answer and explanation

Answer: A (surplus in the market.)

Explanation

Above equilibrium price, more is supplied than demanded, giving a surplus.