CA Foundation Exam > CA Foundation Questions > An increase in supply with unchanged demand l...
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An increase in supply with unchanged demand leads to:
- a)Rise in price and fall in quantity
- b)Fall in both price and quantity
- c)Rise in both price and quantity
- d)Fall in price and rise in quantity
Correct answer is 'D'. Can you explain this answer?
Most Upvoted Answer
An increase in supply with unchanged demand leads to:a)Rise in price a...
Explanation:
When there is an increase in supply with unchanged demand, the market equilibrium shifts to the right, which means that the supply curve shifts to the right. This creates a situation where there is more supply than demand in the market. The following are the possible outcomes:
Fall in price: When there is an excess supply of goods, suppliers tend to lower the price of their goods to attract more buyers. This leads to a fall in the price of the goods.
Rise in quantity: When the price of goods falls, buyers tend to buy more of the goods. This leads to a rise in the quantity demanded of the goods.
Rise in quantity supplied: Suppliers tend to increase their supply of goods in response to the fall in price. This leads to a rise in the quantity supplied of the goods.
Fall in price and rise in quantity: The above outcomes lead to a fall in price and a rise in quantity supplied and demanded. This is represented by a movement along the demand and supply curve.
Therefore, the correct answer is 'D' - Fall in price and rise in quantity.
When there is an increase in supply with unchanged demand, the market equilibrium shifts to the right, which means that the supply curve shifts to the right. This creates a situation where there is more supply than demand in the market. The following are the possible outcomes:
Fall in price: When there is an excess supply of goods, suppliers tend to lower the price of their goods to attract more buyers. This leads to a fall in the price of the goods.
Rise in quantity: When the price of goods falls, buyers tend to buy more of the goods. This leads to a rise in the quantity demanded of the goods.
Rise in quantity supplied: Suppliers tend to increase their supply of goods in response to the fall in price. This leads to a rise in the quantity supplied of the goods.
Fall in price and rise in quantity: The above outcomes lead to a fall in price and a rise in quantity supplied and demanded. This is represented by a movement along the demand and supply curve.
Therefore, the correct answer is 'D' - Fall in price and rise in quantity.
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Community Answer
An increase in supply with unchanged demand leads to:a)Rise in price a...
Due to increase in supply while demand remaining constant producers would inoder to clear their stock sold the goods at a cheaper price and thus the priced would fall. As the price would fall more amount of consumers would avail the product and thus the demand would rise...
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