When supply and demand for a product increase simultaneously, we
A) can predict that both the market clearing price and the equilibrium quantity will increase.
B) can predict that both the market clearing price and the equilibrium quantity will decrease.
C) cannot predict the market clearing price, but know that the equilibrium quantity will increase.
D) cannot predict the change in either the equilibrium quantity or the market clearing price.

Question

Quizplus · Accepted Answer

When both supply and demand increase, the equilibrium quantity will definitely increase because more is being supplied and more is being demanded. However, the effect on the market clearing price is uncertain without knowing the relative magnitudes of the shifts in supply and demand.

When Supply and Demand for a Product Increase Simultaneously, We