The correct option is 1 and 3 only.
Explanation
In microeconomics, market equilibrium is determined by the intersection of the demand and supply curves. A rightward shift in the demand curve indicates an increase in demand, while a rightward shift in the supply curve indicates an increase in supply. Analyzing simultaneous shifts requires assessing the combined impact on equilibrium price and equilibrium quantity.
Statement-wise Analysis
- Statement 1 is Correct: A rightward shift in the demand curve increases the equilibrium quantity. Similarly, a rightward shift in the supply curve also increases the equilibrium quantity. Since both forces work in the same direction regarding quantity, the new equilibrium quantity will definitely be higher than the original.
- Statement 2 is Incorrect: A rightward shift in demand tends to raise the price (due to higher competition among buyers), whereas a rightward shift in supply tends to lower the price (due to greater availability of goods). Because these two forces exert opposing pressures on price, the final equilibrium price depends on the relative magnitude of the shifts. It does not definitely increase; it could increase, decrease, or remain constant.
- Statement 3 is Correct: If the magnitude of the increase in demand is exactly equal to the magnitude of the increase in supply, the upward pressure on price from demand is perfectly offset by the downward pressure on price from supply. In this specific scenario, the equilibrium price remains unchanged.
Key Takeaway
When both demand and supply increase (shift right) simultaneously, the equilibrium quantity definitely increases. However, the change in equilibrium price is indeterminate without knowing the relative magnitude of the shifts.