Assume the most typical shapes for the demand and supply in a competitive market.Suppose that demand falls and supply increases.Which of the following statements is correct?
A) The equilibrium price will fall;the equilibrium quantity may rise or fall.
B) The equilibrium price will rise;the equilibrium quantity may rise or fall.
C) The equilibrium quantity will fall;the equilibrium price may rise or fall.
D) The equilibrium quantity will rise;the equilibrium price may rise or fall.
E) The equilibrium price will fall;the equilibrium quantity will not change.

Question

Quizplus · Accepted Answer

In a typical competitive market, a fall in demand and an increase in supply will result in a surplus of goods. This will put downward pressure on the price and may increase or decrease the equilibrium quantity depending on the magnitude of the shifts in demand and supply. Therefore, the correct statement is that the equilibrium price will fall while the equilibrium quantity may rise or fall. Option A is the only one that correctly reflects this outcome.

Assume the Most Typical Shapes for the Demand and Supply