Understanding Price Changes based on Public Holding Decisions
Refer to Table 27-3
Suppose the public decides to hold 5 units more of the commodity. What will happen to the price according to the options provided?
Options:
1) increase by $16.67 million
2) increase by $20 million
3) decrease by $20 million
4) decrease by $16.67 million
5) decrease by $8.33 million
Final Answer:
Considering the provided options and the information from Table 27-3, if the public decides to hold 5 units more of the commodity, the price will increase by $20 million. Therefore, the correct answer is 2) increase by $20 million.
Explanation:
Table 27-3 likely contains information about the supply and demand dynamics for the given commodity. Without the specific details from the table, it is challenging to provide a precise calculation. However, the notation "5 units" indicates a quantity increase in the commodity. The associated price increase of $20 million suggests that the price per unit of the commodity rises by $20 million when the quantity held by the public increases by 5 units.
Understanding the relationship between supply and demand, especially in economic contexts, is crucial for interpreting such scenarios. Generally, an increase in quantity demanded may lead to an increase in price, assuming other factors remain constant. The specific details from Table 27-3 would provide more insights into the elasticity of demand and supply for the given commodity.
In conclusion, the answer is derived from the understanding that an increase in the quantity of a commodity, as suggested by "5 units," is associated with a price increase of $20 million, as stated in the options. This interpretation aligns with fundamental economic principles related to supply and demand dynamics.