Question

Suppose the demand for premium bottled water increases rapidly during​ 2018. At the same​ time, six more firms begin producing premium bottled water. A student remarks​ that, because of these​ events, we​ can't know for certain whether the price of premium bottled water will rise or fall. The​ student's remarks​ (that, because of these​ events, we​ can't know for certain whether the price of premium bottled water will rise or​ fall) is

Answer 1

Answer: Correct

Step-by-step explanation: When demand for a good rises and at the same time supply for it also rises, the quantity sold in the market will rise for certain. However, it cannot be determined what will be the effect on its price as the effect on price will depend on the magnitude of the shifts in the two curves. Thus, the​ student's remarks​ (that, because of these​ events, we​ can't know for certain whether the price of premium bottled water will rise or​ fall) is correct.