Without more information, the supply and demand model cannot predict the effect on price of: a)...

Without more information, the supply and demand model cannot predict the effect on price of:

a) a simultaneous increase in demand and increase in supply.

b) a simultaneous decrease in demand and increase in supply.

c) a demand increase, with supply being the same.

d) a simultaneous increase in demand and decrease in supply.

Solutions

Expert Solution

Ans) (a) a simultaneous increase in demand and increase in supply.

EXPLANATION-

When both the demand and supply increases simultaneously then the effect on equilibrium price is ambigious. Whether the equilibrium price is higher or lower or unchanged depends on the extent to which each curve shifts.

Rahul Sunny answered 1 year ago

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