An increase in demand for a product and a reduction in the costs of production would:
A)increase the equilibrium quantity and increase the equilibrium price.
B)increase the equilibrium quantity and decrease the equilibrium price.
C)increase the equilibrium quantity and cause an indeterminate change in the equilibrium price.
D)decrease the equilibrium quantity and cause an indeterminate change in the equilibrium price.

Question

An increase in demand for a product and a reduction in the costs of production would:
A)​increase the equilibrium quantity and increase the equilibrium price.
B)​increase the equilibrium quantity and decrease the equilibrium price.
C)​increase the equilibrium quantity and cause an indeterminate change in the equilibrium price.
D)​decrease the equilibrium quantity and cause an indeterminate change in the equilibrium price.

Quizplus · Accepted Answer

An increase in demand shifts the demand curve to the right, increasing both the equilibrium quantity and price. A reduction in production costs shifts the supply curve to the right, increasing the equilibrium quantity but decreasing the equilibrium price. The combined effect increases the equilibrium quantity, but the effect on price is indeterminate without knowing the magnitude of the shifts.

An Increase in Demand for a Product and a Reduction