Question 40

Quantity increases.

An increase in supply with constant demand leads to a higher equilibrium quantity. As suppliers are willing to sell more at the same price, the quantity available in the market rises.

A) Price remains the same.

This option is incorrect because an increase in supply typically puts downward pressure on prices, rather than keeping them constant. In the context of supply and demand, a shift in the supply curve does affect the equilibrium price.

B) Quantity increases.

This option is correct. When supply increases while demand remains unchanged, the market can accommodate a greater quantity of goods, leading to an increase in the equilibrium quantity. This is a fundamental principle of supply and demand dynamics.

C) Price increases.

This option is incorrect as an increase in supply usually results in a decrease in price, not an increase. The additional supply creates a surplus at the previous price level, prompting sellers to lower prices to clear their inventory.

D) Quantity decreases.

This option is incorrect because an increase in supply does not lead to a decrease in quantity. Instead, it allows for a larger quantity of goods to be sold at equilibrium, contrasting with the implication of a reduction in quantity.

Conclusion

The correct answer is that quantity increases when supply rises and demand remains constant. This is a direct reflection of basic economic principles where increased supply leads to more goods available in the market, affirming that all other options fail to accurately represent the effects of such a supply shift.