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What will cause a decrease in market equilibrium price and an increase in equilibrium...

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brooke89 | Student, Undergraduate | (Level 2) Honors

Posted October 2, 2012 at 4:51 PM via web

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What will cause a decrease in market equilibrium price and an increase in equilibrium quantity?

an increase in supply

an increase in demand

a decrease in supply
 
a decrease in demand
 
 

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted October 2, 2012 at 5:00 PM (Answer #1)

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Of the options that you have given here, the thing that would cause an increase in equilibrium quantity and a decrease in equilibrium price is an increase in supply.

To see how this works, the best thing to do is use a graph.  First, you draw supply and demand curves to represent the equilibrium price and quantity before the change.  Then, you draw in a new supply curve to show an increase in supply.  An increase in supply is shown by a movement of the curve to the right.

When you move the supply curve to the right (assuming the demand curve does not move) you have a new equilibrium in which the price has gone down while the quantity has increased.

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