If the market supply increases and, simultaneously, market demand decreases, the new equilibrium will show:
A) market price will decrease, and market quantity exchanged could increase, decrease, or remain unchanged.
B) market price will increase, and market quantity exchanged will decrease.
C) market price will increase, and the quantity exchanged could increase, decrease, or remain the same.
D) market price could increase, decrease, or remain the same, and quantity exchanged will increase.
E) market price will increase, decrease, or remain the same, and quantity exchanged will decrease.

Question

Quizplus · Accepted Answer

When market supply increases and market demand decreases, the market price will decrease. However, the change in quantity exchanged could go in one of three directions: it could increase if the increase in supply is greater than the decrease in demand, it could decrease if the decrease in demand is greater than the increase in supply, or it could remain unchanged if the two changes balance each other out perfectly. Therefore, choice A is the best answer.

If the Market Supply Increases And, Simultaneously, Market Demand Decreases