Price Reduction Creates Market Shortage Steps:

• Review the table to identify quantities demanded and supplied at the current price, assuming it shows a surplus (QS > QD).
• Reduce price to $1.00 per kilo and compare new quantities from the schedules.
• At $1.00, quantity demanded increases while quantity supplied decreases, per the law of demand and supply.
• Result: QD exceeds QS, shifting the market from surplus to shortage.

Why B is correct:

• At a price below equilibrium, the law of supply and demand dictates excess demand, creating a shortage as buyers want more than sellers offer.

Why the others are wrong:

• A: Price changes cause movement along the demand curve, not shifts from changes in non-price factors like income or tastes.
• C: Supply schedules shift right only from non-price factors like lower input costs; price reduction moves along the existing curve.
• D: No factor here causes a leftward supply shift, such as higher taxes; price affects quantity supplied, not the curve itself.

Final answer: B