Question

True or False If the demand & supply for a product both increase the equilibrium quantity of the product must also increase Why
True or False If the demand & supply for a product both increase the equilibrium price of the product must also increase Why
True or False If the demand & supply for a product decreases and the supply of the product increases, the equilibrium price of the product may increase or decrease, depending on whether supply or demand has shifted by more Why

Answer 1

1. True - Everything shifts up (higher) as there is more supply and more demand. Imagine if you have a graph with the x-axis being your supply and the y-axis your demand, then the point of equilibrium (meaning the demand & supply cross) will be higher if both increase.

2. False - As the intensity of the demand alone did not increase, because there is no new shortage of supply. So the price will remain the same. (actually in a more complex real life scenario, the price would also probably go down, because of economies of scale in providing goods in larger quantities

3. If the supply increases more, the price will go down as basically the sellers will increase but the buyers did not, so buyers will be able to say "wait a minute, I won't pay that much anymore, there is this other guy selling the same thing who has no buyer for it!'