Question

Which of the following changes in the demand for and the supply of a good will necessarily result in an increase in both the equilibrium price and quantity of the good in a market?


Demand Supply
Increase Increase
Option A,Table with 2 columns and 2 rows.Row 1: Column 1, 'Demand'; Column 2, 'Supply' Row 2: Column 1, 'Increase'; Column 2, 'Increase'

a

Demand Supply
Increase No change
Option B,Table with 2 columns and 2 rows.Row 1: Column 1, 'Demand'; Column 2, 'Supply' Row 2: Column 1, 'Increase'; Column 2, 'No change'

b

Demand Supply
No change Increase
Option C,Table with 2 columns and 2 rows.Row 1: Column 1, 'Demand'; Column 2, 'Supply' Row 2: Column 1, 'No change'; Column 2, 'Increase'

c

Demand Supply
Decrease Increase
Option D,Table with 2 columns and 2 rows.Row 1: Column 1, 'Demand'; Column 2, 'Supply' Row 2: Column 1, 'Decrease'; Column 2, 'Increase'

d

Demand Supply
No change Decrease

Answer 1

Option B.

An increase in demand with supply unchanged shifts the demand curve right, which unambiguously raises both the equilibrium price and the equilibrium quantity.