The question requires us to determine the option which is certainly true when the demand and the supply curve increase simultaneously.
Explanation of Solution
An increase in demand will cause both the
An increase in supply will cause the equilibrium price to fall and the equilibrium quantity to increase.
As a result, when demand and supply both rise at once, the equilibrium quantity will undoubtedly increase, but the effect on the equilibrium price will be unclear.
Depending on how much demand and supply have changed, the equilibrium price may rise, fall, or stay the same.
So, option “c” is correct.
The following table represents the changes in equilibrium quantity and equilibrium price when demand and supply change:
Factors | Equilibrium quantity | Equilibrium price |
Increase in demand | Increase | Increase |
Decrease in demand | Decrease | Decrease |
Increase in supply | Increase | Decrease |
Decrease in supply | Decrease | Increase |
Chapter 7 Solutions
Krugman's Economics For The Ap® Course
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