Market for a good is in equilibrium. There is simultaneous increase demand and supply of the good. Explain its effect on market price.

Market for a good is in equilibrium. There is simultaneous increase de

1.	Market for a good is in equilibrium. There is simultaneous increase demand and supply of the good. Explain its effect on market price.
Answer» Solution :There are three possibilities. (i) If the RELATIVE (percentage) increase in demand is greater thanthe increase in supply, price will rise.The price will rise because of excess supply in MARKET. (II) If the relative (percentage ) increase in demand is less than the increase in supply, price will fall. The price will fall because of excess supply in market. (iii) If the relative ( percentage) increasein demand is EQUAL to the increase in supply, price will remain unchanged. The price will remain unchanged because there is neither excess demand nor excess supply in the market.