An increase in supply results in a(n)
A) increase in demand
B) decrease in equilibrium quantity and an increase in equilibrium price
C) decrease in equilibrium quantity and a decrease in equilibrium price
D) decrease in equilibrium price and an increase in equilibrium quantity
E) unfavorable shift in tastes and preferences

Question

Quizplus · Accepted Answer

An increase in supply will cause a surplus as there is an excess supply of goods. This means that the market will be flooded with products that are not being sold at the current price. To get rid of the surplus, producers will lower their prices until the excess supply clears. This leads to a decrease in the equilibrium price and an increase in the equilibrium quantity. Therefore, D is the correct answer.

An Increase in Supply Results in A(n)