Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
An increase in supply typically leads to a decrease in equilibrium price.
B
Higher demand causes the supply curve to shift to the right.
C
The law of demand indicates that as prices increase, quantity demanded decreases.
D
An increase in demand generally results in a higher equilibrium price.
E
An increase in supply will always lead to an increase in quantity demanded.
Understanding the Answer
Let's break down why this is correct
Answer
When the price of a good is high, buyers want less of it, so quantity demanded falls, while sellers are willing to sell more, raising quantity supplied; this causes the price to drop until demand equals supply. If the price is too low, buyers want more but sellers supply less, pushing the price up until the two quantities match. The point where quantity demanded equals quantity supplied is called the equilibrium price, and it is reached because prices adjust in response to shortages or surpluses. For example, if a new smartphone is priced too low, many people will buy it, creating a shortage that pushes the price up until the market clears. Thus, price changes always move the market toward equilibrium where demand equals supply.
Detailed Explanation
When supply rises, sellers have more goods, so the price falls. Other options are incorrect because The mistake is thinking demand moves the supply curve; The error is believing supply always boosts quantity demanded.
Key Concepts
Demand and Supply
Market Equilibrium
Price Elasticity
Topic
Demand and Supply Basics
Difficulty
hard level question
Cognitive Level
understand
Practice Similar Questions
Test your understanding with related questions
1
Question 1Which of the following scenarios best illustrates how both demand and supply factors can influence the price of a product in a competitive market?
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2
Question 2In the context of perfect elasticity, which of the following statements best describes the shape of the demand curve and its economic implications?
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3
Question 3Demand is to price as supply is to what?
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4
Question 4Which of the following scenarios best illustrates the law of demand?
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5
Question 5Demand : Price :: Supply : ?
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6
Question 6Which of the following statements accurately describe the dynamics of market equilibrium? Select all that apply.
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7
Question 7Which of the following statements accurately describe price elasticity of demand? Select all that apply.
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