Question

Assume there is a simultaneous increase in the number of consumers, a decrease in income (assume an inferior good), and an expectation by consumers of a higher price. Which of the following statements is correct

a)More information is needed to answer this question.

b)The equilibrium price will decrease, and the equilibrium quantity will decrease.

c)The equilibrium price will increase, and the equilibrium quantity will decrease.

d)The equilibrium price will decrease, and the equilibrium quantity will increase.

e)The equilibrium price will increase, and the equilibrium quantity will increase.

Answer 1

Option

e)The equilibrium price will increase, and the equilibrium quantity will increase.

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The increase in the number of consumers increases demands and increases both price and quantity.

The decrease in income increases the demand for inferior goods and increases both price and quantity.

The expectation of higher prices increases demand and shifts the demand curve to the right and increases both price and quantity.

In total, price and quantity increases.