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

Question

Quizplus · Accepted Answer

An increase in demand and a decrease in supply will cause the market clearing price to increase, but the effect on equilibrium quantity cannot be determined without more information. It depends on the relative magnitudes of the shifts in demand and supply curves.

If Demand Increases and Supply Decreases