Question 35

Price indeterminate; quantity up

When consumer demand and firm supply both rise, the equilibrium price becomes indeterminate, while the equilibrium quantity increases. This is due to the simultaneous shifts in demand and supply, leading to a higher quantity being sold at the new equilibrium.

A) Price up; quantity down

This option is incorrect because an increase in both consumer demand and firm supply would not lead to a decrease in quantity. Instead, the quantity would increase due to higher availability of goods and increased consumer willingness to purchase.

B) Price up; quantity indeterminate

This option is not accurate as it suggests that the price will rise while the quantity remains indeterminate. While the quantity indeed rises, the effect on price is indeterminate since the simultaneous increase in demand and supply can lead to different price outcomes depending on the magnitude of the shifts.

C) Price indeterminate; quantity up

This option is correct because when both demand and supply increase, the quantity sold in the market will increase. However, the effect on price cannot be determined without knowing the relative shifts in demand and supply, making the equilibrium price indeterminate.

D) Price indeterminate; quantity down

This option is incorrect because it asserts that quantity would decrease, which contradicts the premise of rising demand and supply. With both increasing, the quantity in the market would increase, not decrease.

Conclusion

Thus, the correct answer is C, as both demand and supply increases lead to an increase in equilibrium quantity, while the equilibrium price remains indeterminate due to the competing effects of demand and supply changes. All other options fail to accurately represent the outcomes of simultaneous increases in demand and supply.