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Question
What will be the effect upon equilibrium price when an increase in demand is greater than increase in supply?
Options
Equilibrium price remains unchanged
Equilibrium price rises
Equilibrium price falls
None of these
MCQ
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Solution
Equilibrium price rises
Explanation:
When the increase in demand is greater than the increase in supply, the higher demand puts more upward pressure on price than the increased supply can offset. As a result, the equilibrium price rises, while the equilibrium quantity also increases.
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