If demand increases and supply decreases, then the

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Quizplus · Accepted Answer

When demand increases, it leads to a higher equilibrium price and quantity. However, when supply decreases, it leads to a lower equilibrium quantity and higher price. Since the direction of the change in price is determined by the larger of the two effects, in this case, an increase in demand, the equilibrium price will rise. However, the effect on the equilibrium quantity is unknown as it depends on the magnitude of the change in demand and supply.

If Demand Increases and Supply Decreases, Then the