Simultaneous Increase in Demand and Supply

Steps:

• Increase in demand shifts the demand curve rightward, raising both price and quantity.
• Increase in supply shifts the supply curve rightward, lowering price and raising quantity.
• Both shifts reinforce the increase in equilibrium quantity.
• The net effect on price is indeterminate without knowing the relative magnitudes of the shifts.

Why D is correct:

• According to the law of supply and demand, rightward shifts in both curves always increase equilibrium quantity traded.

Why the others are wrong:

• A: Price falls only if supply shift exceeds demand shift; otherwise, it may rise.
• B: Price rises only if demand shift exceeds supply shift; otherwise, it may fall.
• C: Quantity rises with both shifts, so it cannot fall.

Final answer: D