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When demand and supply both increase but supply rises in a greater proportion than demand, the new equilibrium price will:
ARise above the original equilibrium price
BRemain exactly equal to the original price
CFall below the original equilibrium price
DBecome impossible to determine even in direction
Answer & Solution
Correct answer: C. Fall below the original equilibrium price
1. When both curves increase, equilibrium quantity rises for certain.
2. The price effect depends on which shift is larger.
3. If supply rises more than demand, downward pressure dominates.
4. The new equilibrium price is therefore lower, so option C is correct.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 4 Unit II "Determination of Prices", p.6_
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