Chapter 7, Problem 7MCQ

To determine

The question requires us to determine the option which is certainly true when the demand and the supply curve increase simultaneously.

Explanation of Solution

An increase in demand will cause both the equilibrium quantity and equilibrium price to increase.

An increase in supply will cause the equilibrium price to fall and the equilibrium quantity to increase.

As a result, when demand and supply both rise at once, the equilibrium quantity will undoubtedly increase, but the effect on the equilibrium price will be unclear.

Depending on how much demand and supply have changed, the equilibrium price may rise, fall, or stay the same.

So, option “c” is correct.

Economics Concept Introduction

The following table represents the changes in equilibrium quantity and equilibrium price when demand and supply change:

Factors	Equilibrium quantity	Equilibrium price
Increase in demand	Increase	Increase
Decrease in demand	Decrease	Decrease
Increase in supply	Increase	Decrease
Decrease in supply	Decrease	Increase