Suppose demand increases and supply decreases. Which of the following will happen?
A) Equilibrium price will rise, fall, or stay the same while equilibrium quantity will decrease.
B) Equilibrium price will rise, fall, or stay the same while equilibrium quantity will increase.
C) Equilibrium quantity will rise, fall, or stay the same and equilibrium price will increase.
D) Equilibrium quantity will rise, fall, or stay the same while equilibrium price will decrease.
E) The change in equilibrium price and quantity cannot be determined.

Question

Quizplus · Accepted Answer

When demand increases and supply decreases, the equilibrium price will increase due to higher demand and lower supply. However, the change in equilibrium quantity is uncertain as it depends on the relative magnitudes of the shifts in demand and supply.

Suppose Demand Increases and Supply Decreases