The correct option is 1 and 3 only.
Explanation
Market equilibrium is determined by the intersection of the demand and supply curves. Shifts in these curves alter the equilibrium price and quantity. A rightward shift represents an increase, while a leftward shift represents a decrease. When both curves shift simultaneously, the net impact on price and quantity depends on the direction and relative magnitude of the shifts.
Statement-wise Analysis:
- Statement 1 is Correct: A rightward shift in the demand curve leads to a higher equilibrium quantity. Similarly, a rightward shift in the supply curve also leads to a higher equilibrium quantity. Since both shifts exert pressure in the same direction regarding quantity, the equilibrium quantity invariably increases.
- Statement 2 is Incorrect: A rightward shift in demand puts upward pressure on the price, while a rightward shift in supply puts downward pressure on the price. The final equilibrium price depends on which shift is greater in magnitude. If the increase in supply exceeds the increase in demand, the price will fall. Therefore, the price does not invariably increase.
- Statement 3 is Correct: A leftward shift in demand (decrease in demand) reduces the equilibrium price. A rightward shift in supply (increase in supply) also reduces the equilibrium price. Since both factors work simultaneously to lower the price, the equilibrium price invariably decreases.
Key Takeaway:
When demand and supply shift in the same direction (both increase or both decrease), the change in quantity is determinate, but the change in price is ambiguous. When they shift in opposite directions, the change in price is determinate, but the change in quantity is ambiguous.