We cannot predict the effect on the equilibrium quantity, but know that the market clearing price will increase when
A) supply decreases and at the same time demand increases.
B) supply increases and demand increases simultaneously.
C) supply and demand decreases simultaneously.
D) supply and demand increases simultaneously.

Question

Quizplus · Accepted Answer

When supply decreases and demand increases simultaneously, the equilibrium price will certainly go up. However, the effect on the equilibrium quantity will depend on the relative magnitude of the shifts in supply and demand curves. If the decrease in supply is more than the increase in demand, the equilibrium quantity will decrease. If the increase in demand is more than the decrease in supply, the equilibrium quantity will increase.

We Cannot Predict the Effect on the Equilibrium Quantity, but Know