If the price falls from P4 to P3, then output will decrease by

• A. 0 units
• B. 1 units
• C. 2 units
• D. 3 units

Answer: (B)

Verified step by step guidance

1. Identify the initial and final prices in the problem, which are P4 and P3 respectively.
2. Understand that the problem is asking about the change in output as a result of a price change from P4 to P3.
3. Recognize that the problem provides multiple choice options for the change in output: 0 units, 1 unit, 2 units, and 3 units.
4. Consider the concept of price elasticity of supply or demand, which measures how much the quantity supplied or demanded responds to a change in price.
5. Analyze any additional information or context provided in the problem that might indicate how output changes with price, such as a supply or demand curve, to determine the correct change in output.