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