ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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**Question:**

Which of the following is true if both the demand for and supply of oranges increase?

**Options:**

- **A.** It is clear that prices will increase, the change in the quantity of oranges sold is ambiguous.
- **B.** It is clear that quantity sold will increase, the change in the price of oranges is ambiguous.
- **C.** It is clear that prices will decrease, the change in the quantity of oranges sold is ambiguous.
- **D.** It is clear that quantity sold will decrease, the change in the price of oranges is ambiguous.

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Explanation:

This question assesses the understanding of economic principles related to supply and demand. When both the demand and supply of a good increase, the effect on the equilibrium price and quantity can vary based on the magnitude of the shifts in the demand and supply curves. 

1. **Option A** suggests that prices will increase, but the change in quantity is not clear. 
2. **Option B** proposes that the quantity sold will increase, but the change in price is uncertain.
3. **Option C** claims that prices will decrease, but the change in quantity is ambiguous. 
4. **Option D** suggests that the quantity sold will decrease, but the change in price is uncertain.

In such scenarios, if the demand and supply both increase, typically the quantity sold will increase (as suggested in Option B), because higher demand leads to more quantity being purchased and higher supply ensures more quantity is available. The price change is less predictable and depends on the relative magnitudes of the increase in demand and supply. If both increase equally, price may not change significantly. Thus, **Option B** would generally be the correct interpretation.
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Transcribed Image Text:**Question:** Which of the following is true if both the demand for and supply of oranges increase? **Options:** - **A.** It is clear that prices will increase, the change in the quantity of oranges sold is ambiguous. - **B.** It is clear that quantity sold will increase, the change in the price of oranges is ambiguous. - **C.** It is clear that prices will decrease, the change in the quantity of oranges sold is ambiguous. - **D.** It is clear that quantity sold will decrease, the change in the price of oranges is ambiguous. --- Explanation: This question assesses the understanding of economic principles related to supply and demand. When both the demand and supply of a good increase, the effect on the equilibrium price and quantity can vary based on the magnitude of the shifts in the demand and supply curves. 1. **Option A** suggests that prices will increase, but the change in quantity is not clear. 2. **Option B** proposes that the quantity sold will increase, but the change in price is uncertain. 3. **Option C** claims that prices will decrease, but the change in quantity is ambiguous. 4. **Option D** suggests that the quantity sold will decrease, but the change in price is uncertain. In such scenarios, if the demand and supply both increase, typically the quantity sold will increase (as suggested in Option B), because higher demand leads to more quantity being purchased and higher supply ensures more quantity is available. The price change is less predictable and depends on the relative magnitudes of the increase in demand and supply. If both increase equally, price may not change significantly. Thus, **Option B** would generally be the correct interpretation.
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