When supply increases and the (downward-sloping) demand curve remains in the same position,
Part 2
A.
price rises and equilibrium quantity falls.
B.
price falls and equilibrium quantity falls.
C.
price rises and equilibrium quantity rises.
D.
price falls and equilibrium quantity rises.
B. price falls and equilibrium quantity falls.
To determine the effect of an increase in supply while the (downward-sloping) demand curve remains in the same position, we need to understand the relationship between supply, demand, price, and equilibrium quantity.
In a market, the equilibrium price and quantity are determined by the intersection of the supply and demand curves. When the supply of a good or service increases, the supply curve shifts to the right. At the same time, if the demand curve remains unchanged, it will intersect the new supply curve at a different point.
Now, let's consider the options:
A. Price rises and equilibrium quantity falls: This option contradicts the typical relationship between supply and demand. When supply increases, it usually leads to a decrease in price and an increase in the equilibrium quantity. Therefore, this option is not correct.
B. Price falls and equilibrium quantity falls: This option suggests that an increase in supply will cause both price and equilibrium quantity to decrease. While the price could decrease due to the increased supply, it is unlikely that the equilibrium quantity would also decrease. Therefore, this option is not correct.
C. Price rises and equilibrium quantity rises: This option does not align with the general relationship between supply and demand. An increase in supply typically leads to a decrease in price and an increase in the equilibrium quantity. Thus, this option is not correct.
D. Price falls and equilibrium quantity rises: This option aligns with the usual relationship between supply and demand. When supply increases, the price tends to fall, and the equilibrium quantity tends to rise. Hence, the correct answer is D.
In summary, when supply increases and the (downward-sloping) demand curve remains in the same position, the price falls, and the equilibrium quantity rises.
When supply increases and the (downward-sloping) demand curve remains in the same position, the correct answer is:
B. Price falls and equilibrium quantity falls.
When supply increases, there is an excess supply in the market. This leads to a downward pressure on prices as suppliers try to sell their goods. As a result, the price falls. The equilibrium quantity also falls because consumers are not willing to buy as much at the higher price.