question archive The demand for cat food decreases while the supply increases
The demand for cat food decreases while the supply increases
Subject:MarketingPrice:2.88 Bought3
The demand for cat food decreases while the supply increases. The equilibrium price of cat food _____, and the equilibrium quantity _____.
A. rises; decreases
B. falls; increases
C. does not change; increases
D. rises; perhaps changes but we can't say if it increases, decreases, or stays the same
E. falls; perhaps changes but we can't say if it increases, decreases, or stays the same
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Answer: E
A decrease in demand puts downward pressure on both price and quantity. An increase in supply puts downward pressure on price and upward pressure on quantity. Therefore, when demand decreases and supply increases, both puts downward pressure on prices but act in opposite directions on quantity. We thus know that equilibrium price will fall but we don't know what will happen to equilibrium quantity.
