Suppose that demand for a good increases and, at the same time, supply of the good decreases. What would happen in the market for the good?
A)Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous.
B)Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous.
C)Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous.
D)Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.

Question

Quizplus · Accepted Answer

When demand for a good increases, it puts upward pressure on both the equilibrium price and quantity. Conversely, when supply decreases, it also puts upward pressure on the price due to scarcity but downward pressure on the quantity. Therefore, the equilibrium price would definitely increase, but the effect on quantity is ambiguous because the increase in demand tends to increase quantity while the decrease in supply tends to decrease it.

Suppose That Demand for a Good Increases And, at the Same