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Assume that in the market for plasma TVs, there is an increase in supply
Assume that in the market for plasma TVs, there is an increase in supply. The result will be:
a. a decrease in equilibrium price and quantity.
b. an increase in equilibrium quantity and uncertain effect on equilibrium price.
c. a decrease in equilibrium price and an increase in equilibrium quantity.
d. an increase in equilibrium price and quantity.
Expert Solution
The answer is c).
We can use the supply demand diagram to answer this question. When there is an increase in supply, the supply curve shifts to the right. Holding demand curve the same, the rightward shift of the supply curve leads to a lower price and a higher quantity in equilibrium.
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