A simultaneous increase in demand and decrease in supply would lead to:
A)An increase in the equilibrium price and a decrease in the quantity sold.
B)An increase in both the equilibrium price and the quantity sold.
C)A decrease in both the equilibrium price and the quantity sold.
D)An uncertain effect on the equilibrium quantity but an increase in the equilibrium price.

Question

A simultaneous increase in demand and decrease in supply would lead to:
A)​An increase in the equilibrium price and a decrease in the quantity sold.
B)​An increase in both the equilibrium price and the quantity sold.
C)​A decrease in both the equilibrium price and the quantity sold.
D)​An uncertain effect on the equilibrium quantity but an increase in the equilibrium price.

Quizplus · Accepted Answer

When demand increases and supply decreases simultaneously, the equilibrium price will definitely increase because the higher demand pushes prices up, and the lower supply means less is available at any given price. However, the effect on the equilibrium quantity is uncertain without knowing the relative magnitudes of the demand increase and the supply decrease.

A Simultaneous Increase in Demand and Decrease in Supply Would