Question

Suppose the market for a good is initially in equilibrium. Which of the following is most likely to occur if both the demand for and the supply of the good increases during a particular point in time?

a. The equilibrium antity will increase
b. Both the equilibrium price and equilibrium quantity will decrease
c. The equilibrum price will increase
d. The equilibrium price will decrease
e. The equilibrium quantity will decrease

Answer 1

If both the demand for and the supply of a good increase, the most likely outcome is that the equilibrium quantity will increase. The effect on the equilibrium price will depend on the relative magnitudes of the increases in demand and supply.

option c is the correct

Step-by-step explanation:

In this scenario, both the demand for and the supply of the good are increasing. When demand and supply both increase, the equilibrium quantity is likely to increase. This means that more of the good will be produced and sold in the market.

However, the effect on the equilibrium price is uncertain. It will depend on the relative magnitudes of the increases in demand and supply. If the increase in supply is greater than the increase in demand, then the equilibrium price will decrease. On the other hand, if the increase in demand is greater than the increase in supply, then the equilibrium price will increase.

Therefore, the most likely outcome in this situation is that the equilibrium quantity will increase, but the effect on the equilibrium price cannot be determined without more information.