Question

If demand for a product falls at the same time supply rises, which of the following might we expect?a. Both the equilibrium price and the equilibrium quantity could rise or fall.b. Equilibrium price would fall, and equilibrium quantity could either rise or fall.c. Equilibrium price would rise, and the equilibrium quantity could either rise or fall.d. Equilibrium price and quantity would fall.

Answer 1

The correct response is b. Equilibrium price would fall, and equilibrium quantity could either rise or fall. When a product is in equilibrium quantity, there is neither a scarcity nor a surplus on the market.

When supply and demand cross, the amount of a good that consumers desire to buy is equal to the amount that its manufacturers are supplying. The only price at which consumer and producer plans coincide is the equilibrium price, which is reached when the quantity sought by consumers and the quantity supplied by producers, respectively, are equal. The equilibrium quantity is the name given to this common quantity. The equilibrium price and quantity are affected by changes in the supply or demand curves. The equilibrium price and quantity both rise as demand rises. Demand declines, which lowers the equilibrium price and quantity. Supply growth results in a drop in price and a rise in quantity at equilibrium.

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