TAMU ECON202 Practice Exam 2 Guide

An increase in demand for lobster, coupled with a decrease in supply due to adverse weather conditions, will lead to a higher equilibrium price in the market for lobster. When demand rises, consumers are willing to pay more for the product, creating upward pressure on prices. Simultaneously, the decrease in supply means that there are fewer lobsters available for sale. The combination of increased demand and decreased supply results in a market scenario where buyers compete for a limited quantity of lobsters, driving the price up further. As for the equilibrium quantity, it may increase or decrease depending on the magnitude of the shifts in demand and supply. If the increase in demand is stronger than the decrease in supply, the equilibrium quantity could rise; however, if the supply decrease is more severe, the equilibrium quantity could decline. Therefore, the most accurate description of this scenario is an increase in equilibrium price with an indeterminate effect on equilibrium quantity.