Which of the following statements is correct?
A. A change in demand or supply can only be caused by a change in price.
B. A simultaneous decrease in demand and an increase in supply will result in an increase in equilibrium price and an uncertain effect on quantity.
C. If the price is currently above equilibrium, the market adjustment will result in a decrease in price and quantity supplied.
D. An increase in supply invariably leads to a shortage in the affected market.
The correct answer is C. If the price is currently above equilibrium, the market adjustment will result in a decrease in price and quantity supplied.
Equilibrium Price and Quantity
The equilibrium price and quantity are derived when the demand and supply curves intersect each other. The equilibrium price and quantity are best derived when the market forces of demand and supply operate freely in the market without any intervention from the government.