Question

The equilibrium price of a commodity will definitely rise if there is a/an :

A increase in both demand and supply. Correct Answer Incorrect Answer
B increase in demand accompanied by a decrease in supply. Correct Answer Incorrect Answer
C increase in supply combined with a decrease in demand. Correct Answer Incorrect Answer
D decrease in both demand and supply. Correct Answer Incorrect Answer

Solution

An equilibrium market price is the price at which there is no tendency for it to change. When price is lower than the equilibrium price, quantity demanded will be greater than quantity supplied . There will be tendency for the price to increase when price is higher than the equilibrium price, quantity supplied will be greater than quantity demanded . There will be a tendency for the price to decrease. Equilibrium market price is attained when the quantity demanded equals quantity supplied, it is sometimes called market clearing price .

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