The figure given below shows the demand [D and D'] and supply [S and S'] curves of shares of stock.Figure 17.2

-According to Figure 17.2, what will be a necessary result of a simultaneous increase in the supply of stocks from S to S' and decrease in the demand from D to D'?

Question

The figure given below shows the demand [D and D'] and supply [S and S'] curves of shares of stock.Figure 17.2
 
-According to Figure 17.2, what will be a necessary result of a simultaneous increase in the supply of stocks from S to S' and decrease in the demand from D to D'?

Quizplus · Accepted Answer

When the supply increases (from S to S'), and demand decreases (from D to D'), there will be an excess supply of shares. To clear this excess supply, the price of shares will have to decrease. Therefore, the necessary result of this situation is a decrease in the price of shares (option A).

The Figure Given Below Shows the Demand [D and D']