Question

Consider the following statement: "An increase in supply decreases the equilibrium price. The decrease in price increases demand."The statement isa. false: decreases in price affect the quantity demanded, not demandb. true: increases in supply decrease price; decreases in price increase demandc. false: increases in supply decrease priced. false: increases in supply increase price; decreases in price increase demand

Answer 1

Answer:

A

Explanation:

In the Demand and Supply curve changes in prices will traduce in movements along the demand or along the supply curve but they will not change their position on the graph, for instance this will affect the quantity demanded or the quantity supplied. In this case, because the demand curve has a negative slope, if price decreases the quantity demanded increases. Intuitively, if consumers perceive a good or a service that is cheaper than before, more people will be interested on buying it.  

When it is said that demand or supply increase or decrease is because one of those or both shifts to left or to right. But this happens only when factors different from prices have changed. The problem does not specify what changes the supply, but it says that "increases" then, we understand that there is a shift to the right of the supply curve. If the demand curve remains constant, then the equilibrium price will decrease, and the equilibrium quantity will increase. So, the statement is partially true at the beginning, but the second part is false.

Answer 2

Answer:

Demand increases as prices decrease!

Explanation:

:)