Question : The equilibrium price of a commodity will rise if there is a/an:
Option 1: increase in supply combined with a decrease in demand.
Option 2: increases in both demand and supply.
Option 3: decrease in both demand and supply.
Option 4: increase in demand accompanied by a decrease in supply.
Correct Answer: increase in demand accompanied by a decrease in supply.
Solution : The correct option is an increase in demand accompanied by a decrease in supply .
When demand rises and supply falls, the commodity's equilibrium price increases. This is because a higher demand means consumers are willing to pay more at any price, pushing prices up. With reduced supply, fewer units are available for sale, which pushes the prices upward. Ultimately, increased demand and decreased supply together lead to a higher equilibrium price.
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