Question

If both supply and demand increase simultaneously, the new equilibrium price is ___________ and the new equilibrium quantity is _________________.

Select one:

a. lower; lower

b. lower; indeterminate

c. indeterminate; higher

d. higher; indeterminate

Answer 1

(c) Let S1 and D1 be the demand and supply carve, at equilibrium E1, now suppose both demand and supply curve shifts to D2 and S2 respectively.

hence new equilibrium E2,

At new equilibrium the price remains constant or indeterminate and quantity increases.