Consider a market that is initially in equilibrium. If we observe that both price and quantity increased, which of the following could have occurred?

Question

Quizplus · Accepted Answer

When both price and quantity increase, it indicates that demand has increased more significantly than any change in supply. This is because an increase in demand, holding supply constant, would raise both the equilibrium price and quantity. If supply decreases simultaneously but the increase in demand is more dominant, the net effect can still be an increase in both price and quantity.

Consider a Market That Is Initially in Equilibrium