A simultaneous shift to the right of both supply and demand will:
A)increase the equilibrium price
B)decrease the equilibrium price
C)increase the equilibrium quantity
D)decrease the equilibrium quantity

Question

Quizplus · Accepted Answer

When both supply and demand shift to the right, the equilibrium quantity will increase. However, the effect on price is ambiguous, as it may either increase or decrease depending on the magnitude of the shifts. When both supply and demand shift to the right, there is an increase in both quantity demanded and quantity supplied. This will result in an increase in equilibrium quantity. However, the effect on equilibrium price will depend on the magnitude of the shifts of the supply and demand curves. If the increase in supply is greater than the increase in demand, there will be a decrease in equilibrium price. If the increase in demand is greater than the increase in supply, there will be an increase in equilibrium price. But since neither A nor B are among the choices, C is the best choice.

A Simultaneous Shift to the Right of Both Supply and Demand