Question

A simultaneous increase in both the demand forand the supply of a good in a market will lead towhich of the following changes in the equilibriumprice and quantity of the good?(A) Increase Increase(B) Indeterminate Decrease(C) Indeterminate Increase(D) Increase Indeterminate(E) Decrease Increase

Answer 1

In a market, a simultaneous increase in both the demand for and the supply of a good will lead to an increase in equilibrium quantity and an indeterminate change in equilibrium price. Thus, the correct option is (D) Increase Indeterminate

Step-by-step explanation:

In a market, a simultaneous increase in both the demand for and the supply of a good will lead to an increase in equilibrium quantity and an indeterminate change in equilibrium price. The increase in demand will shift the demand curve to the right, leading to a higher equilibrium quantity. The increase in supply will shift the supply curve to the right, also leading to a higher equilibrium quantity. However, the change in equilibrium price cannot be determined without additional information.

For example, if demand increases more than supply, the equilibrium price may increase. Conversely, if supply increases more than demand, the equilibrium price may decrease. Therefore, the change in equilibrium price is indeterminate without knowing the magnitudes of the shifts in demand and supply.

Answer 2

When demand and supply increase simultaneously, the equilibrium quantity of a good will increase, but the equilibrium price change is indeterminate without more information.

Step-by-step explanation:

When both demand and supply increase simultaneously in a market, the equilibrium quantity of the good will definitely increase. This is because more of the good is being produced and more is being demanded. However, what happens to the equilibrium price is indeterminate without additional information about the magnitude of the shifts in demand and supply. If the increase in supply is greater than the increase in demand, the price may decrease. If the increase in demand is greater than the increase in supply, the price may increase. If both increase by the same amount, the price will stay the same. Therefore, the correct answer is (C) Indeterminate Increase.