An increase in the demand for peanuts due to changes in consumer tastes,accompanied by an increase in the supply of peanuts as a result of favorable growing conditions,will result in
A)an increase in the equilibrium quantity of peanuts and no change in the equilibrium price.
B)an increase in the equilibrium price of peanuts and no change in the equilibrium quantity.
C)an increase in the equilibrium price of peanuts; the equilibrium quantity may increase or decrease.
D)an increase in the equilibrium quantity of peanuts; the equilibrium price may increase or decrease.

Question

Quizplus · Accepted Answer

An increase in both demand and supply will cause an increase in the equilibrium quantity of peanuts. The change in the equilibrium price is not definite, as it depends on the degree of change in demand and supply. If the increase in demand is larger than the increase in supply, the price will increase. If the increase in supply is larger than the increase in demand, the price will decrease. Therefore, the equilibrium quantity will increase and the equilibrium price may either increase or decrease. Choice D correctly states this relationship.

An Increase in the Demand for Peanuts Due to Changes