Answer:
The remark by the student is correct since;
B. correct When there is an increase in supply and an increase in demand, the change In both new equilibrium price and equilibrium quantity are unknown
Step-by-step explanation:
The major factor that affects the supply and demand is the market price of a good or service. The supply of a good or service is the quantity of goods that producers are willing to sell at a particular price, while the demand is the quantity of goods that consumers are willing to but at a particular price. When the price of a good rises, most producers are usually inclined to supply more of the product. On the contrary, when the prices drop, the suppliers tend to sell less of the good. However, there is a state known as the equilibrium point is the price where the quantity of goods supplied is the same as the quantity of goods demanded. This typically means that the suppliers and the consumers are comfortable with the price of that particular good or service. In reality, this scenario is often extremely rare.
In our case, premium bottled water was initially in equilibrium then a sudden rise in demand and a sudden increase in supply also ensued. In this case, it is difficult to know what how much the price and demand will change since we don't have a clue on the quantity of bottled water that will be supplied by the new firms that have entered the market. At the same time, we don't know how much the demand for premium bottled water increased.