If both supply and demand increase simultaneously, the new equilibrium price is ___________ and the new equilibrium quantity is _________________.
A)lower; lower
B)lower; indeterminate
C)indeterminate; higher
D)higher; indeterminate

Question

Quizplus · Accepted Answer

When both supply and demand increase simultaneously, the equilibrium quantity will always increase. However, the effect on the equilibrium price will depend on the magnitude of the increase in both supply and demand. If the increase in demand is greater than the increase in supply, then the equilibrium price will increase. Conversely, if the increase in supply is greater than the increase in demand, then the equilibrium price will decrease. Therefore, the new equilibrium price cannot be determined with certainty, making option C the best choice.

If Both Supply and Demand Increase Simultaneously, the New Equilibrium