If market demand increases while market supply decreases, what is the most certain effect on the new equilibrium?
Correct answer: A. Equilibrium price rises, but quantity is uncertain
- A. Equilibrium price rises, but quantity is uncertain
- B. Equilibrium quantity rises, but price is uncertain
- C. Both equilibrium price and quantity rise
- D. Both equilibrium price and quantity fall
Explanation
A rightward demand shift raises price and quantity, while a leftward supply shift raises price but lowers quantity. Therefore, price definitely rises, but the final quantity depends on the relative size of the two shifts.
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About Microeconomics
Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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