What happens to the equilibrium price and equilibrium quantity of a good if both the producers and the consumers of that good expect its price to be higher in the future?

Question

Quizplus · Accepted Answer

When both producers and consumers expect higher future prices, demand increases now (as consumers buy before prices rise) and supply decreases now (as producers hold back to sell later at higher prices), leading to a higher equilibrium price but an indeterminate effect on quantity.

What Happens to the Equilibrium Price and Equilibrium Quantity of a Good