Is it true or false? If supply of aproduct increases and demand for the product decreases, the equilibrium quantity will definitely change.
True. When the supply of a product increases and the demand for the product decreases, the equilibrium quantity will definitely change. The equilibrium quantity is the quantity at which the quantity demanded equals the quantity supplied in a market. Any change in either supply or demand will result in a new equilibrium quantity.
To understand why the equilibrium quantity changes in this scenario, let's break it down:
1. Increase in supply: When the supply of a product increases, it means there is more of the product available in the market. This could be due to factors such as more producers entering the market, improved production technology, or increased availability of raw materials.
2. Decrease in demand: On the other hand, when the demand for a product decreases, it means that consumers are buying less of the product. This could be due to factors such as a shift in consumer preferences, changes in income levels, or the availability of substitute products.
Given these changes, the new equilibrium quantity will be determined by the intersection of the new supply curve and the new demand curve. The increased supply will push the equilibrium quantity towards a higher level, while the decreased demand will pull it towards a lower level. The net effect will depend on the magnitude of the changes in supply and demand.
In summary, whenever there is a change in either supply or demand, the equilibrium quantity will adjust to a new level in order to balance the market.