If we observe a rise in the equilibrium price of good A,we know that the demand for A has
A)increased or the supply of A has decreased or both.
B)increased or the supply of A has increased or both.
C)decreased or the supply of A has increased or both.
D)decreased or the supply of A has decreased or both.
E)not changed.

Question

Quizplus · Accepted Answer

An increase in the equilibrium price of a good indicates that there has been an increase in demand, a decrease in supply, or both. This is because when demand exceeds supply, prices are bid up until a new equilibrium is reached at a higher price. Therefore, the best choice is A - the demand for A has increased or the supply of A has decreased or both.

If We Observe a Rise in the Equilibrium Price of Good