Consider the market for a good that is initially in equilibrium.Which of the following is most likely to happen if supply increases by a smaller amount than the increase in demand?

A) Equilibrium price will fall and equilibrium quantity will rise.
B) Equilibrium price will rise and equilibrium quantity will fall.
C) Both equilibrium price and equilibrium quantity will rise.
D) Equilibrium price will rise but the change in equilibrium quantity is indeterminate.
E) Both equilibrium price and equilibrium quantity will fall.

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Zybrea Knight · Accepted Answer

Final Answer : C, Explanation :  When both supply and demand increase, but demand increases by a larger amount than supply, the equilibrium price and quantity will both rise. The larger increase in demand pushes the price up, while the increase in supply, although smaller, contributes to a higher equilibrium quantity.

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