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Supply & Demand Practice Question

By Mike Moffatt, About.com

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Supply & Demand Practice Question - Part C

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Supply & Demand - Part C

Illustrate each of the following events using a demand and supply diagram for bananas:

The price of bananas rises.

The question here is: Why did the price of bananas rise? It could be because the demand for bananas has increased, causing both the quantity consumed and the price to rise.

Another possibility is that the supply of bananas has decreased, causing the price to rise but the quantity consumed to decrease.

In the diagram I've drawn, I have both effects taking place: The demand has risen and the supply has dropped. Note that only having one of these effects is sufficient to answer the question.

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