Question

When supply and demand for a product increase simultaneously, we can predict that both the market clearing price and the equilibrium quantity will increase. cannot predict the market clearing price, but know that the equilibrium quantity will increase. can predict that both the market clearing price and the equilibrium quantity will decrease. cannot predict the change in either the equilibrium quantity or the market clearing price.

Answer 1

When both supply and demand increase, the equilibrium quantity will definitely rise, but the change in market clearing price cannot be predicted without knowing the relative magnitude of the shifts in supply and demand curves.

Step-by-step explanation:

When supply and demand for a product increase simultaneously, we cannot predict the market clearing price, but we know that the equilibrium quantity will increase. This occurs because the supply curve and demand curve shift to the right. The new equilibrium quantity is higher since more of the product is supplied and demanded. However, the resultant market clearing price depends on the relative magnitude of the shifts in supply and demand. If demand increases more than supply, the price will rise. Conversely, if supply increases more than demand, the price will fall. But if they increase by an equal amount, the price will stay the same.

Answer 2

Answer: Explanation:

When supply and demand for a product increase simultaneously, we cannot predict the market clearing price, but know that the equilibrium quantity will increase.

NB: We cannot predict the market clearing price because no adequate information such as government policy is provided. such information would likely affect the market clearing price either positively or negatively.

P.S: This is a business question.