When supply increases and demand stays the same, what happens to the equilibrium point of price and quantity?

Rationale

Quantity increases.

When supply increases while demand remains unchanged, the equilibrium quantity in the market rises. This shift occurs because the increased supply puts downward pressure on prices, encouraging more quantity to be sold at the new equilibrium.

A (Price remains the same.) YOUR ANSWER

If supply increases and demand stays constant, the price cannot remain the same. Instead, the increased supply would lead to a surplus at the initial price, prompting sellers to lower prices until a new equilibrium is established at a higher quantity and lower price.

B (Quantity increases.) CORRECT

This choice accurately reflects the market dynamics where an increase in supply, with demand unchanged, results in a higher equilibrium quantity. More goods available at lower prices encourages consumers to purchase more, increasing the overall quantity traded in the market.

C (Price increases.) YOUR ANSWER

An increase in supply typically decreases the price, not increases it. If demand remains constant while more products are available, the excess supply leads to a reduction in prices, contradicting the assertion that prices would rise.

D (Quantity decreases.) YOUR ANSWER

This statement is incorrect as an increase in supply leads to an increase in quantity, not a decrease. If supply rises while demand is unchanged, the market will adjust to sell more units at a lower price, thus increasing the quantity exchanged.

Conclusion

In summary, when supply increases while demand remains constant, the equilibrium quantity increases, reflecting a market response to the greater availability of goods at lower prices. Understanding this principle is crucial in economics, as it illustrates how supply and demand interact to determine market outcomes.

When supply increases and demand stays the same, what happens to the equilibrium point of price and quantity?

Quantity increases.

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