Question

What will be the effect on equilibrium price and quantity when increase in demand is equal to increase in supply?

Options

• Equilibrium price will increase

• Equilibrium quantity will fall

• Equilibrium price will fall

• Price will remain unchanged, but equilibrium quantity will increase

Answer 1

Price will remain unchanged, but equilibrium quantity will increase

Explanation:

When demand and supply increase in the same proportion, the equilibrium price remains constant because the upward pressure from demand is balanced by the increasing supply. However, the equilibrium quantity rises due to increased demand and availability of the commodity.