If supply increases and demand increases, the the price must drop while the number of units purchased may remain unchanged. T or F?
What do you think the answer is? Why?
I think it is false because the number of units purchased would have to change to stay at equilibrium level without creating a shortage?? I think?
I agree that it's false. But when supply and demand increase, then the number of units must have increased.
If the reserve requirement is 7%, a N$70 deposit would create additional deposits to the value of N$10. is this statement true or false?
False.
When both supply and demand increase, the price is not necessarily going to drop while the number of units purchased remains unchanged. The impact on the price and the quantity of units purchased depends on the magnitude of the changes in both supply and demand.
The general relationship between supply, demand, and price is based on the law of supply and demand. According to this law, an increase in supply with constant demand would typically lead to a decrease in price and an increase in the quantity of units purchased. Conversely, an increase in demand with constant supply would generally lead to an increase in price and quantity.
In the scenario you mentioned, where both supply and demand increase, it is possible for the price to remain constant if the increase in supply matches the increase in demand. In this case, the number of units purchased would likely increase. However, if either the increase in supply or the increase in demand is more substantial, it would affect the price and quantity of units purchased accordingly.