An increase in supply and a decrease in demand occur in a market. What happens to the equilibrium price and quantity?
A) The equilibrium price decreases; the change in the equilibrium quantity is uncertain.
B) The equilibrium price decreases; the equilibrium quantity increases.
C) The equilibrium price increases; the change in the equilibrium quantity is uncertain.
D) The equilibrium price increases; the equilibrium quantity decreases.

Question

Quizplus · Accepted Answer

An increase in supply causes a rightward shift of the supply curve, while a decrease in demand causes a leftward shift of the demand curve. Both shifts lead to a decrease in equilibrium price, but the change in the equilibrium quantity is uncertain because the size of the shifts is unknown.

An Increase in Supply and a Decrease in Demand Occur