An Increase in Demand Coupled with a Decrease in Supply

question 110

Multiple Choice

An increase in demand coupled with a decrease in supply results in a(n)

• A) increase in equilibrium price and an ambiguous effect on equilibrium quantity
• B) increase in equilibrium quantity and a decrease in equilibrium price
• C) decrease in equilibrium quantity and an ambiguous effect on equilibrium price
• D) surplus
• E) decrease in the equilibrium price and quantity

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Definitions:

Market Outcomes

The results of interactions between consumers and producers in a market, including prices, quantities of goods and services produced and consumed, and allocation of resources.

Private Goods

Goods that are both excludable and rivalrous, meaning only paying customers can consume them, and one individual's consumption reduces the quantity available for others.

Market Failure

A situation where the allocation of goods and services by a free market is not efficient, often leading to negative externalities or public goods not being produced in sufficient quantities.

State-Owned Bridge

A bridge that is owned, financed, and operated by the government or state authorities, indicating public ownership and responsibility.