Choose the correct pair.
| Column A | Column B |
| A. When increase in demand= decrease in Supply | 1. Price decrease |
| B. When Increase in demand = decrease in supply | 2. Price increase, quantity increase |
| C. When Increase in demand = decrease in supply | 3. Price Increase, quantity constant |
| D. When When Increase in demand > decrease in supply | Price Falls, Quantity Constant |
Answer & explanation
Correct answer: option 3
The correct answer is Option 3: C-3
- Increase in demand shifts the demand curve rightward, leading to higher equilibrium quantity and price.
- Decrease in supply shifts the supply curve leftward, leading to lower equilibrium quantity and higher price.
- Since both shifts cause price to rise, the final equilibrium price must increase.
- However, because the increase in demand is exactly equal to the decrease in supply, the changes in quantity cancel each other out.
- This means the equilibrium quantity remains constant while the equilibrium price increases.
Other Options
A-1 (Price decreases) → Incorrect (Price should increase, not decrease).
B-2 (Price increases, quantity increases) → Incorrect (Quantity will be constant).
D-4 (Price falls, quantity constant) → Incorrect (When the increase in demand is greater than the decrease in supply, the equilibrium price will rise, and the equilibrium quantity will also rise.).