Answer to Question #90627 in Macroeconomics for Deshuanmiles miles

Question

Assume that both the supply of bottled water and the demand for bottled water rise during the summer but that supply increases more rapidly than demand. What can you conclude about the direction of impacts on equilibrium price and equilibrium quantity?

Answer 1

The equilibrium price of bottled water will fall, and its equilibrium quantity will rise. Whenever supply and demand both increase, equilibrium quantity will rise. Equilibrium price falls because the increase in supply is greater than the increase in demand