Suppose there is a simultaneous increase in the demand for wheat and increase in the supply of wheat. Which of the following will occur as a result of these simultaneous events?
A)Both the market clearing price and equilibrium quantity will rise.
B)The market clearing price will fall, but the equilibrium quantity will rise.
C)The market clearing price may rise, fall, or stay the same, but the equilibrium quantity will rise.
D)The market clearing price will fall, but the equilibrium quantity may rise, fall, or stay the same.

Question

Quizplus · Accepted Answer

An increase in both demand and supply will lead to an increase in the equilibrium quantity, but the change in the market clearing price is indeterminate. The direction of the price change will depend on the magnitude of the shifts in demand and supply. If the increase in demand is greater than the increase in supply, the price will rise. If the increase in supply is greater than the increase in demand, the price will fall. If the increases in demand and supply are equal, the price will stay the same. Therefore, option C is correct.

Suppose There Is a Simultaneous Increase in the Demand for Wheat