If demand decreases and supply increases,the direction of change in the equilibrium quantity is unpredictable unless the relative magnitudes of the demand and supply changes are known.

Question

Quizplus · Accepted Answer

The direction of change in equilibrium quantity will depend on the relative magnitude of the change in demand and supply. If the decrease in demand is greater than the increase in supply, the equilibrium quantity will decrease. If the increase in supply is greater than the decrease in demand, the equilibrium quantity will increase. Therefore, the direction of change is unpredictable without knowing the relative magnitudes of the changes in demand and supply.

If Demand Decreases and Supply Increases,the Direction of Change in the Equilibrium