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An increase in supply with demand remaining the same, brings about.
- a)An increase in equilibrium quantity and decrease in equilibrium price
- b)An increase in equilibrium price and decrease in equilibrium quantity.
- c)Decrease in both equilibrium price and quantity
- d)None of these
Correct answer is option 'A'. Can you explain this answer?
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An increase in supply with demand remaining the same, brings about.a)A...
Increase in Supply and Equilibrium Quantity and Price
Explanation:
When there is an increase in supply with demand remaining the same, the following changes occur in the market:
1. Excess Supply: The increase in supply creates an excess supply in the market, as the quantity supplied now exceeds the quantity demanded.
2. Price Adjustment: In response to excess supply, sellers will start reducing the price of the product to encourage buyers to purchase more.
3. Equilibrium: The market will continue to adjust until a new equilibrium is reached, where the quantity supplied and quantity demanded are once again equal.
4. Increase in Equilibrium Quantity: As a result of the increase in supply, the equilibrium quantity will increase, as there is now more of the product available in the market.
5. Decrease in Equilibrium Price: The decrease in price will lead to an increase in demand, which will eventually balance out the excess supply. As a result, the equilibrium price will decrease.
Conclusion:
Therefore, an increase in supply with demand remaining the same will lead to an increase in equilibrium quantity and decrease in equilibrium price.
Explanation:
When there is an increase in supply with demand remaining the same, the following changes occur in the market:
1. Excess Supply: The increase in supply creates an excess supply in the market, as the quantity supplied now exceeds the quantity demanded.
2. Price Adjustment: In response to excess supply, sellers will start reducing the price of the product to encourage buyers to purchase more.
3. Equilibrium: The market will continue to adjust until a new equilibrium is reached, where the quantity supplied and quantity demanded are once again equal.
4. Increase in Equilibrium Quantity: As a result of the increase in supply, the equilibrium quantity will increase, as there is now more of the product available in the market.
5. Decrease in Equilibrium Price: The decrease in price will lead to an increase in demand, which will eventually balance out the excess supply. As a result, the equilibrium price will decrease.
Conclusion:
Therefore, an increase in supply with demand remaining the same will lead to an increase in equilibrium quantity and decrease in equilibrium price.
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An increase in supply with demand remaining the same, brings about.a)An increase in equilibrium quantity and decrease in equilibrium priceb)An increase in equilibrium price and decrease in equilibrium quantity.c)Decrease in both equilibrium price and quantityd)None of theseCorrect answer is option 'A'. Can you explain this answer?
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