• Card 61 / 100: If supply increases while demand decreases, what can we say about the change in (equilibrium) price? What about the change in (equilibrium) quantity?

    Answer:
    The equilibrium price will definitely drop, because both changes point in that direction. However, we don't know what will happen to the equilibrium quantity, because the supply shift tends to increase it, while the demand shift tends to decrease it. Without more information we don't know which effect will dominate.

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Capitalism: The Market Economy

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Attribution:  Dr. Robert P. Murphy, Lessons for the Young Economist. (Mises Institute), http://mises.org/document/6215/Lessons-for-the-Young-Economist (Accessed 04 April, 2014). License: Creative Commons BY
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