Saving and taxes are considered leakages from the spending stream

Refer to Figure 3-6. The figure above represents the market for coffee grinders. Assume that the market price is $21. Which of the following statement is true?

A) There will be a shortage that will cause the price to increase; demand will then decrease and supply will increase until the price equals $25. B) There is a shortage that will cause the price to increase; quantity demanded will then decrease and quantity supplied will increase until the price equals $25. C) There is a shortage that will cause the price to increase; quantity supplied will then decrease and quantity demanded will increase until the price equals $25. D) There is a shortage that will cause the price to decrease; quantity demanded will then increase and quantity supplied will decrease until the price equals $25.

The supply curve for watches

A) is downward sloping. B) shows the relationship between the quantity of watches firms are willing and able to supply and the quantity of watches consumers are willing and able to purchase. C) shows the supply of watches consumers are willing and able to buy at any given price. D) shows the relationship between the price of watches and the quantity of watches supplied.