ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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the removal of an effective maximum price on the good
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technological progress in the production of the good
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the imposition of a tax on the good
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the granting of a subsidy to producers of the good
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Detailed explanation-1: -If simultaneous shifts in demand and supply cause equilibrium price or quantity to move in the same direction, then equilibrium price or quantity clearly moves in that direction.
Detailed explanation-2: -If both demand and supply increase, there will be an increase in the equilibrium output, but the effect on price cannot be determined.
Detailed explanation-3: -Answer: In case of simultaneous changes in demand and supply, if the increase in demand is more than the increase in supply, then as we have seen in Fig. 1(b) above, the new equilibrium price becomes higher than the original equilibrium price.
Detailed explanation-4: -An increase in demand, all other things unchanged, will cause the equilibrium price to rise; quantity supplied will increase. A decrease in demand will cause the equilibrium price to fall; quantity supplied will decrease.