Simultaneous Shifts in Demand and Supply

Steps:

• Increased demand shifts the demand curve rightward, raising both price and quantity.
• Decreased production costs shift the supply curve rightward, lowering price and raising quantity.
• The combined rightward shifts increase equilibrium quantity definitively.
• The net price effect depends on the relative magnitudes of the shifts, making it indeterminate.

Why C is correct:

• Law of supply and demand: Rightward demand shift raises price; rightward supply shift lowers price; quantity rises unambiguously, but price direction is uncertain without shift sizes.

Why the others are wrong:

• A: Price does not necessarily fall, as demand increase could dominate.
• B: Price does not necessarily rise, as supply increase could dominate.
• D: Quantity is certain to increase, not uncertain.

Final answer: C