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Assume that in the market for good Z there is a simultaneous increase in demand and the quantity supplied. The result will be :
- a)an increase in equilibrium price and quantity.
- b)a decrease in equilibrium price and quantity.
- c)an increase in equilibrium quantity and uncertain effect on equilibrium price.
- d)a decrease in equilibrium price and increase in equilibrium quantity.
Correct answer is option 'C'. Can you explain this answer?
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Assume that in the market for good Z there is a simultaneous increase ...
Simultaneous Increase in Demand and Quantity Supplied for Good Z
When there is a simultaneous increase in demand and quantity supplied for a good, it means that consumers want to buy more of the good while producers are willing to supply more of the good. This can happen for various reasons such as an increase in population, change in consumer preferences, or technological advancements.
Effect on Equilibrium Price and Quantity
The simultaneous increase in demand and quantity supplied will lead to an increase in equilibrium quantity, which means that more of the good will be bought and sold at the same price. However, the effect on equilibrium price is uncertain because it depends on the magnitude of the increase in demand and quantity supplied.
If the increase in demand is greater than the increase in quantity supplied, then the equilibrium price will increase along with the equilibrium quantity. This is because the demand for the good is higher than the supply, leading to a shortage of the good. As a result, consumers are willing to pay a higher price to obtain the good, and producers can charge more for it.
On the other hand, if the increase in quantity supplied is greater than the increase in demand, then the equilibrium price will decrease while the equilibrium quantity increases. This is because the supply of the good is higher than the demand, leading to a surplus of the good. As a result, producers have to lower the price to sell their excess inventory, and consumers can buy the good for a lower price.
Conclusion
In conclusion, when there is a simultaneous increase in demand and quantity supplied for a good, the effect on equilibrium price is uncertain, while the equilibrium quantity will increase. The outcome depends on the relative magnitude of the increase in demand and quantity supplied.
When there is a simultaneous increase in demand and quantity supplied for a good, it means that consumers want to buy more of the good while producers are willing to supply more of the good. This can happen for various reasons such as an increase in population, change in consumer preferences, or technological advancements.
Effect on Equilibrium Price and Quantity
The simultaneous increase in demand and quantity supplied will lead to an increase in equilibrium quantity, which means that more of the good will be bought and sold at the same price. However, the effect on equilibrium price is uncertain because it depends on the magnitude of the increase in demand and quantity supplied.
If the increase in demand is greater than the increase in quantity supplied, then the equilibrium price will increase along with the equilibrium quantity. This is because the demand for the good is higher than the supply, leading to a shortage of the good. As a result, consumers are willing to pay a higher price to obtain the good, and producers can charge more for it.
On the other hand, if the increase in quantity supplied is greater than the increase in demand, then the equilibrium price will decrease while the equilibrium quantity increases. This is because the supply of the good is higher than the demand, leading to a surplus of the good. As a result, producers have to lower the price to sell their excess inventory, and consumers can buy the good for a lower price.
Conclusion
In conclusion, when there is a simultaneous increase in demand and quantity supplied for a good, the effect on equilibrium price is uncertain, while the equilibrium quantity will increase. The outcome depends on the relative magnitude of the increase in demand and quantity supplied.
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Assume that in the market for good Z there is a simultaneous increase in demand and the quantity supplied. The result will be :a)an increase in equilibrium price and quantity.b)a decrease in equilibrium price and quantity.c)an increase in equilibrium quantity and uncertain effect on equilibrium price.d)a decrease in equilibrium price and increase in equilibrium quantity.Correct answer is option 'C'. Can you explain this answer?
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