Question

If both the demand and supply curves shift to the right in the same proportion, then

• A. the price of the commodity and purchased quantity will increase
• B. the price will remain constant but the purchased quantity will increase
• C. the price will increase but the purchased quantity will remain constant
• D. none of these

Hint:

When both demand and supply increase in equal proportion, the price stays the same, but the quantity of goods exchanged increases.
This outcome is common in markets experiencing simultaneous increases in both consumer demand and producer supply.

Answer 1

The Correct Option is B

Step 1: Understanding the Shifts in Demand and Supply Curves:
When both the demand and supply curves shift to the right by the same proportion, it indicates that both the willingness of consumers to buy more and the ability of producers to supply more have increased. In this case, the quantity of goods exchanged increases, but the price remains unchanged.
Step 2: Impact on Price and Quantity:
Increase in Demand and Supply:
- Both shifts lead to an increase in the quantity of goods exchanged in the market, which causes the equilibrium quantity to rise.
Constant Price:
- Since the demand and supply increase in equal proportion, the price remains unchanged. The forces driving the price up and down are balanced.
Purchased Quantity:
- With the higher demand and supply, more goods are exchanged in the market, but the price stays constant because the shifts are in equal proportion.
Step 3: Conclusion:
As a result, the purchased quantity will increase, but the price remains constant. This is characteristic of scenarios where both the demand and supply curves shift equally.