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CSEET · Economic and Business Environment · Basics of Demand and Supply and Forms of Market Competition

If both the demand and the supply of a good increase, with the rise in demand being larger than the rise in supply, the equilibrium quantity will:

Equilibrium quantity increases and price rises. Both curves shifting right increase the quantity traded. Since the demand increase outweighs the supply increase, excess demand dominates at the old price, so the new equilibrium price is higher than before.

  1. AIncrease and the price will riseCorrect
  2. BIncrease and the price will fall
  3. CDecrease and the price will rise
  4. DRemain unchanged and the price will fall

Explanation

Both shifts raise the equilibrium quantity. Because demand shifts right by more than supply, the net pressure on price is upward. Hence quantity increases and price rises. If supply had risen more, price would fall.

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