The market clearing price of computer modems has just decreased. Which of the following could have caused this change?
A) a decrease in supply at the same time that demand increases
B) an increase in supply at the same time that demand decreases
C) a decrease in supply with demand unchanged
D) an increase in demand with supply unchanged

Question

Quizplus · Accepted Answer

When there is an increase in supply at the same time that demand decreases, the market clearing price for computer modems will decrease. This is because at the new supply level, producers will be willing to sell the modems at a lower price to attract consumers who may be less willing to buy at the current demand level. This will lead to a decrease in the market clearing price.

The Market Clearing Price of Computer Modems Has Just Decreased