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Supply & Demand Practice Question

By Mike Moffatt, About.com

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Supply & Demand Practice Question - Part E

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Supply & Demand - Part E

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

Consumers expect the price of bananas to increase in the future.

For the purposes of this question, we will assume that the future means the very near future. Such as tomorrow.

If we knew there was going to be a big jump in the price of bananas tomorrow, we would make sure to make our bananas purchases today. So the demand for bananas today would increase.

Note that this increase in demand causes the price of bananas to increase today. So the anticipation of a future price hike will often cause a rise in price today.

Now you should be able to answer supply & demand questions with confidence. If you have any question, you can contact me by using the feedback form.

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