Suppose there is a simultaneous increase in the demand for rice and increase in the supply of rice. Which of the following will occur as a result of these simultaneous events?
A) Both the market clearing price and equilibrium quantity will rise.
B) The market clearing price will fall, but the equilibrium quantity will rise.
C) The market clearing price may rise, fall, or stay the same, but the equilibrium quantity will rise.
D) The market clearing price will fall, but the equilibrium quantity may rise, fall, or stay the same.

Question

Quizplus · Accepted Answer

An increase in both demand and supply leads to a definite increase in the equilibrium quantity. Whether the market clearing price increases, decreases or remains constant depends on the magnitude of the shifts in demand and supply. If the increase in demand is greater than the increase in supply, the market clearing price will rise. If the increase in supply is greater than the increase in demand, the market clearing price will fall. If the increases in demand and supply are equivalent, the market clearing price will remain the same.

Suppose There Is a Simultaneous Increase in the Demand for Rice