Final answer:
To observe a decrease in market equilibrium price and an increase in equilibrium quantity, there must be an increase in supply. An increase in supply means more of a product is available, leading to lower prices and higher quantities being sold if demand is unchanged.
Step-by-step explanation:
The question you've asked pertains to changes in market equilibrium price and equilibrium quantity when there is a shift in supply or demand. For the market to experience a decrease in market equilibrium price and an increase in equilibrium quantity, this corresponds to an increase in supply. When supply increases, producers are willing to sell more of the product at every price point, which, if demand remains unchanged, typically results in a lower equilibrium price and a higher quantity sold as the additional supply saturates the market.
Here's what happens with each option:
- A. Increase in demand - This generally results in a higher equilibrium price and quantity.
- B. Decrease in supply - This typically leads to a higher equilibrium price and lower quantity.
- C. Increase in supply - This leads to a decrease in equilibrium price and an increase in equilibrium quantity.
- D. Decrease in demand - This generally results in a lower equilibrium price and quantity.
In the financial market, similar principles apply. A rise in supply of loans, for example, would generally lead to a decrease in interest rates and an increase in the quantity of loans made and received.