Relative to the initial equilibrium, when the supply curve shifts right, there will be
options:
a decrease in price and a decrease in quantity.
a decrease in price and an increase in quantity.
an increase in price and an increase in quantity.
an increase in price and a decrease in quantity.
The correct answer and explanation is:
The correct answer is: a decrease in price and an increase in quantity.
When the supply curve shifts to the right, it means that producers are now willing and able to produce more goods at each price level. This could happen for a variety of reasons such as a decrease in production costs, advancements in technology, or an increase in the number of suppliers in the market.
The increase in supply causes the equilibrium price to fall. This happens because there is now a greater quantity of the good or service available in the market. With more goods available and no immediate change in demand, sellers will lower prices to attract buyers, leading to a decrease in the price of the product.
Simultaneously, the increase in supply leads to a higher equilibrium quantity. With more goods available at a lower price, consumers are willing to purchase more of the product. Therefore, the overall quantity of goods exchanged in the market rises.
This shift in the supply curve does not directly affect demand. However, the price decrease and quantity increase are the direct outcomes of the change in supply, as the market moves to a new equilibrium where the price is lower and the quantity is higher than initially.
To summarize, when the supply curve shifts right, there is an increase in the amount of goods available, which results in a lower price and a higher quantity of goods being bought and sold.