An increase in demand causes a:
A) temporary shortage at the old equilibrium price and a higher new equilibrium price and quantity.
B) permanent shortage, leaving the equilibrium price and quantity unchanged.
C) temporary surplus at the old equilibrium price and a lower equilibrium price and quantity.
D) temporary shortage at the old equilibrium price, a higher new equilibrium price, and a lower new equilibrium quantity.

Question

Quizplus · Accepted Answer

When there is an increase in demand, it means that consumers are willing to buy more of the product at each price level. This causes a temporary shortage at the old equilibrium price, as the quantity demanded exceeds the quantity supplied. As a result, producers will increase the price to balance the market, resulting in a higher new equilibrium price and quantity.

An Increase in Demand Causes A