Question

Assume we observe that the equilibrium price of a certain good has DECREASED significantly over the past 5 years, with virtually NO CHANGE in the equilibrium quantity. Which of the following is the most likely explanation? Over the past 5 years:

1.both supply and demand have decreased.

2.demand has increased but supply has decreased.

3.both supply and demand have increased.

4.supply has increased but demand has decreased.

Answer 1

3. both supply and demand have increased.