Answer to Question #305890 in Microeconomics for Nana

Question

An increase in supply tends to increase the equilibrium price and quantity?

Answer 1

NO, The graph above is clearly showing the effects of an increase in supply on the equilibrium price and quantity.

When supply increases, price drops from point P₀ to P₁ hence decreasing the equilibrium price. On the other hand, an increase in supply cause quantity demanded to increase from Q₀ to Q₁.