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If sellers strongly expect the price of a storable good to rise sharply in the near future, their supply of that good today is likely to:
Adecrease as they hold back stock for later
Bincrease as they rush to sell immediately
Cremain unchanged because price is fixed today
Dfall to zero in every market without exception
Answer & Solution
Correct answer: A. decrease as they hold back stock for later
1. Sellers compare today's price with the expected future price.
2. If a higher price is expected later, selling now is relatively less attractive.
3. They hold back stock, so supply today falls.
4. Thus an expected future price rise reduces today's supply. 'Fall to zero' is too extreme.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 2 Unit III "Supply", p.1_
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