Question

In which situation is the change in equilibrium price and quantity in the same direction?

• A. When demand curve shifts rightward
• B. When supply curve shifts rightward
• C. When supply curve shifts leftward
• D. None of these

Hint:

A rightward shift in the demand curve leads to an increase in both the equilibrium price and quantity.

Answer 1

The Correct Option is A

Step 1: Understanding equilibrium shifts.
Changes in equilibrium occur when either the demand curve or supply curve shifts. The direction of the shift affects both the equilibrium price and quantity. If both price and quantity move in the same direction, the shift must either increase or decrease both variables simultaneously.

Step 2: Analyzing the options.
(A) When demand curve shifts rightward: Correct. If demand increases (rightward shift), the equilibrium price and quantity both rise. This is because more demand leads to higher prices and more quantity being bought and sold.
(B) When supply curve shifts rightward: This would lower the price and increase the quantity, so the price and quantity move in opposite directions.
(C) When supply curve shifts leftward: This would increase the price and decrease the quantity, so again, the price and quantity move in opposite directions.
(D) None of these: This is incorrect, as option (A) is the correct answer.

Step 3: Conclusion.
The correct answer is (A) When demand curve shifts rightward, as it causes both price and quantity to increase in the same direction.