Question

An article in the Wall Street Journal noted that the demand for video Internet advertising was increasing at the same time that the number of Internet sites accepting advertising was also increasing. After reading the article, a student argue:"From this information, we know that the price of Internet ads should rise, but we don't know whether the total of Internet ads will increase or decrease."a. incorrect because the quantity of Internet ads will not changeb. correct because the price of Internet ads will decrease and the quantity of Internet ads will decrease if the shift in supply is larger and will increase if the shift in demand is largerc. incorrect because the quantity of Internet ads will rise, but the change in price depends on the magnitude of the relative shifts of demand and supplyd. correct because the price of Internet ads will decrease and the quantity of Internet ads will decrease if the shift in demand is larger and will increase if the shift in supply is largere. incorrect because the quantity of Internet ads will unambiguously decrease when supply increases

Answer 1

Answer:

c.

Explanation:

If the demand for video internet advertising is increasing, then the demand curve shifts to the right. And if the number of internet sites accepting advertising also increases, then the supply curve shifts to the right. Independently on the magnitude shifts the equilibrium quantity will rise, but the change in price depends on these magnitudes. For example, if the demand shift is greater than the supply shift, the eq. quantity will increase but the price will increase too. If the supply shift is greater than the demand shift, the eq. quantity will increase but the price will decrease. And if the magnitude shifts are similar it is probable that the eq. quantity increases and the price remains the same.