Suppose that demand decreases and supply increases. Which of the following statements correctly indicate the effect on equilibrium price and equilibrium quantity?

Step 1: Analyze the impact of a decrease in demand. A decrease in demand means the demand curve shifts to the left. This, by itself, would lead to a lower equilibrium price and a lower equilibrium quantity. Step 2: Analyze the impact of an increase in supply. An increase in supply means the supply curve shifts to the right. This, by itself, would lead to a lower equilibrium price and a higher equilibrium quantity. Step 3: Combine the effects on equilibrium price and quantity. • Equilibrium Price: Both the decrease in demand and the increase in supply push the equilibrium price down. Therefore, the equilibrium price will definitely decrease. • Equilibrium Quantity: The decrease in demand pushes the quantity down, while the increase in supply pushes the quantity up. Since these effects work in opposite directions, the net effect on the equilibrium quantity is indeterminate without knowing the relative magnitudes of the shifts. It may increase, decrease, or stay the same. Step 4: Select the statement that matches this analysis. The statement that correctly indicates these effects is: "the equilibrium price will decrease; the equilibrium quantity may increase or decrease". The final answer is the equilibrium price will decrease; the equilibrium quantity may increase or decrease Last free one today — make it count tomorrow, or type /upgrade for unlimited.