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Question

When the supply of a good increases, keeping the demand constant, its equilibrium price .

A
increases
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B
decreases
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C
remains same
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D
is ambiguous
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Solution

The correct option is B decreases
When supply increases, the market is no longer at equilibrium. The quantity supplied exceeds the quantity demanded, leading to excess supply and decrease in prices. This would cause a downward movement along the demand curve. Hence, the equilibrium price decreases.

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