Assume demand is held constant and supply increases. The result is a decrease in the equilibrium price and an increase in the equilibrium quantity of the item bought and sold.

Question

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According to the law of supply and demand, an increase in supply while demand remains constant will lead to a surplus of the item. In order to sell the excess supply, suppliers will lower the price of the item, leading to a decrease in the equilibrium price. As the price decreases, consumers will demand more of the item, resulting in an increase in the equilibrium quantity bought and sold.

Assume Demand Is Held Constant and Supply Increases