If demand decreases and supply increases
A) the market clearing price will decrease, and the equilibrium quantity will increase.
B) the market clearing price will decrease, and equilibrium quantity will decrease.
C) the equilibrium quantity will decrease, but the change in the market clearing price cannot be determined without more information.
D) the equilibrium price will decrease, but the change in the equilibrium quantity cannot be determined without more information.

Question

Quizplus · Accepted Answer

When demand decreases, it tends to lower both price and quantity. When supply increases, it tends to lower price but increase quantity. Therefore, the price will definitely decrease, but the change in quantity depends on the relative magnitudes of the shifts in demand and supply.

If Demand Decreases and Supply Increases