Which of the following will cause a decrease in market equilibrium price and an increase...
Which of the following will cause a decrease in market equilibrium price and an increase in market equilibrium quantity
- A) an increase in supply
- B) an increase in demand
- C) a decrease in demand
- D) a decrease in supply
Correct Answer: A) an increase in supply
Explanation
This Economics question is asking which scenario will cause a decrease in market equilibrium price and an increase in market equilibrium quantity.
Market equilibrium price is the price at which the quantity of a good supplied is equal to the quantity of the good demanded. Market equilibrium quantity is the quantity of a good that is bought and sold at the market equilibrium price.
Option A, which is an increase in supply, is the correct answer. An increase in supply means that more of the good is available in the market, which will cause a shift in the supply curve to the right. This, in turn, will cause the market equilibrium price to decrease and the market equilibrium quantity to increase.
Option B, which is an increase in demand, will cause the market equilibrium price and quantity to both increase. Option C, which is a decrease in demand, will cause the market equilibrium price and quantity to both decrease. Option D, which is a decrease in supply, will cause the market equilibrium price to increase and the market equilibrium quantity to decrease.
It is essential to understand the concept of market equilibrium in Economics. Market equilibrium occurs when the quantity of a good supplied is equal to the quantity of the good demanded. At this point, the market is said to be in equilibrium, and the market price is the equilibrium price.
To learn more about market equilibrium and its determinants, please read the relevant sections of the recommended textbooks.