Question

Suppose there is an increase in both supply and demand for personal computers. In the market for personal computers, we would expect the

a. the change in the equilibrium quantity to be ambiguous and the equilibrium price to rise

b. equilibrium quantity to rise and the equilibrium price to fall.

c. equilibrium quantity to rise and the equilibrium price to rise

d. equilibrium quantity to rise and the change in the equilibrium price to be ambiguous

Answer 1

As demand increase and supply also increases then there is an increase in the Total output quantity and hence equilibrium quantity will also increase , in this situation customer demand is more means that customer is willing to buy more and hence pay more but at the same time sullpiers are supplying more and hence which way prices will move is ambiguus depending on whether supply increase is more dominant or demand increase is more dominant.

Hence Option d is correct