📚 Learning Guide
Analyzing Market Equilibrium Changes
easy

An increase in demand combined with a decrease in supply will always result in a higher equilibrium price but an indeterminate change in equilibrium quantity.

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Learning Path
Learning Path

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A

True

B

False

Understanding the Answer

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Answer

When demand for a product increases, more people want to buy it, which usually pushes the price up. At the same time, if supply decreases, there are fewer products available for sale. This combination means that sellers can charge higher prices because there are more buyers than products available. However, it’s unclear how much the quantity sold will change because it depends on how much demand increases compared to how much supply decreases. For example, if a new video game becomes very popular (increased demand) but fewer copies are available (decreased supply), the price will go up, but we can't say for sure if more or fewer games will be sold overall.

Detailed Explanation

When more people want a product but there are fewer available, prices go up. Other options are incorrect because Some might think that the quantity will also change in a clear way.

Key Concepts

Market Equilibrium
Demand and Supply Shifts
Price Elasticity
Topic

Analyzing Market Equilibrium Changes

Difficulty

easy level question

Cognitive Level

understand

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