In which of the following cases will the effect on equilibrium output be indeterminate (i. e., depend on the magnitudes of the shifts in supply and demand) ? a. Demand increases and supply increases b. Demand decreases and supply decreases c. Demand decreases and supply increases d. Demand remains constant and supply increases

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Lucille Shelton

5 July, 20:59

In which of the following cases will the effect on equilibrium output be indeterminate (i. e., depend on the magnitudes of the shifts in supply and demand) ? a. Demand increases and supply increases b. Demand decreases and supply decreases c. Demand decreases and supply increases d. Demand remains constant and supply increases

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Answers (1)

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Eduardo Sheppard · Answer 1

c. demand decreases and supply increases

Explanation:

Equilibrium level of output refers to that level of output at which demand equals supply.

If demand decreases, the demand curve will experience a leftward shift. When supply increases, the supply curve shifts to the right. This results into suppliers supplying more and customers demanding lesser.

This will lead to a decrease in equilibrium price but in such a case, the effect on equilibrium quantity cannot be determined i. e the output would be indeterminate.