Answer to Question #236647 in Economics of Enterprise for Likenaw

Question

An increase in demand results in which of the following changes in the commodity’s equilibrium price and quantity? A. Price rises and quantity falls B. Price falls and quantity rises. C. Price and quantity both rise. D. Price and quantity both fall.

Answer 1

Solution:

The correct answer is C. Price and quantity both rise.

An increase in demand for a commodity holding other things constant will result in an increase in the equilibrium price and quantity at the same time. This is because consumers will demand more of the product resulting in its shortage in the market which will lead to an increase in the products price.