If demand and supply both increase
A) the equilibrium quantity definitely will increase and market clearing price definitely will decrease.
B) the equilibrium quantity definitely will increase and market clearing price definitely will increase.
C) the equilibrium quantity definitely will increase but the change in market clearing price cannot be determined without more information.
D) market clearing price definitely will increase but the change in the equilibrium quantity cannot be determined without further information.

Question

Quizplus · Accepted Answer

The increase in both demand and supply will lead to an increase in the equilibrium quantity, but the change in market clearing price cannot be determined without further information such as the magnitude of the changes in demand and supply. If the increase in demand is greater than the increase in supply, then the market clearing price will increase. On the other hand, if the increase in supply is greater than the increase in demand, then the market clearing price will decrease.

If Demand and Supply Both Increase