In which of the following situations will market clearing price decrease and the equilibrium quantity increase?
A) an increase in demand with no change in supply
B) an increase in supply with no change in demand
C) a decrease in supply with no change in demand
D) a decrease in demand with no change in supply

Question

Quizplus · Accepted Answer

When there is an increase in supply with no change in demand, the market clearing price will decrease and the equilibrium quantity will increase. This is because there is now an excess supply of the good, which puts pressure on sellers to lower their prices in order to attract buyers. As the price decreases, the quantity demanded will increase until the excess supply is eliminated and equilibrium is established at a lower price and a higher quantity.

In Which of the Following Situations Will Market Clearing Price