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Question
When increase in demand is less than increase in supply, equilibrium quantity will _________.
When increase in demand is less than increase in supply, equilibrium quantity will _________.
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Solution
The correct option is A increase
When increase in supply is more than increase in demand the equilibrium price reduces and the equilibrium quantity increases. This is because, when supply Is more than demand, quantity supplied increases from Q to Q1 and the price will reduce from P to P1to bring the market at a new equilibrium point which is E1 .
When increase in supply is more than increase in demand the equilibrium price reduces and the equilibrium quantity increases. This is because, when supply Is more than demand, quantity supplied increases from Q to Q1 and the price will reduce from P to P1to bring the market at a new equilibrium point which is E1 .
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