Question

There will be a lower equilibrium price and higher quantity if _____.

supply increases and demand stays the same

supply increases and demand increases

demand increases and supply stays the same

supply increases and demand decreases

Answer 1

Answer: A) supply increases and demand stays the same

Check out the diagram below. The curves S1 and D1 are the original supply and demand curves for some product. If we shift S1 to the right, we get some new curve S2. This is increasing supply. Keeping D1 the same means that the equilibrium price slides down and the quantity goes up.

In short, we have more stuff in the market, and each of those items is cheaper.