If the demand for a good increases at the same time the supply of the good decreases,what happens to equilibrium price and quantity?
A) Equilibrium quantity increases, but the effect on equilibrium price is ambiguous.
B) Equilibrium quantity decreases, but the effect on equilibrium price is ambiguous.
C) Equilibrium price increases, but the effect on equilibrium quantity is ambiguous.
D) Equilibrium price decreases, but the effect on equilibrium quantity is ambiguous.

Question

Quizplus · Accepted Answer

When demand for a good increases, it puts upward pressure on both the equilibrium price and quantity. Conversely, when supply decreases, it also increases the price due to scarcity but decreases the quantity. Therefore, the equilibrium price will definitely increase, but the effect on quantity is ambiguous because the increase in demand could offset the decrease in supply, keep it the same, or not fully compensate for the decrease, making the net effect on quantity uncertain.

If the Demand for a Good Increases at the Same