Future Business Leader Achievments (FBLA) Economics Practice Exam

A decrease in the supply of lemons will likely result in which of the following?

1. More lemons sold at a lower price

2. More lemons sold at a higher price

3. Fewer lemons sold at a lower price

4. Fewer lemons sold at a higher price

The correct answer is: Fewer lemons sold at a higher price

A decrease in the supply of lemons means that there are fewer lemons available in the market. According to the basic principles of supply and demand, when the supply of a good decreases while demand remains constant, the result is typically an increase in price. This is because buyers are competing for a limited quantity of goods, which drives prices up. As a consequence of decreased supply, sellers have less product to offer, leading to fewer lemons being sold overall. However, the price at which lemons are sold is higher because of the scarcity created by the reduced supply. Thus, the correct response reflects the reality of market dynamics where a decrease in supply often results in fewer items sold at a higher price. Understanding this relationship between supply and demand dynamics is crucial in economics, as it illustrates how market shortages can lead to elevated prices, impacting both consumer behavior and business strategies.