A rise in the supply of a commodity cause__________

Step 1: Analyze the question The question asks what happens to equilibrium price and equilibrium quantity when supply rises, assuming demand stays the same (ceteris paribus).

Step 2: Explain the concept Equilibrium is where the demand curve and the supply curve meet. A rise in supply means the whole supply curve shifts to the right. At every price, producers now offer more goods for sale.

Step 3: Step-by-step solution

1. Start at the original equilibrium, where quantity demanded equals quantity supplied.
2. Supply increases, so the supply curve shifts right.
3. At the old price, quantity supplied is now greater than quantity demanded. This is a surplus (excess supply).
4. Sellers compete to get rid of the surplus, so the price falls.
5. As the price falls, buyers demand more (a movement down along the demand curve), so the quantity bought and sold rises.
6. A new equilibrium is reached at a lower price and a higher quantity.

Step 4: Check the options

• A. Higher price and lower quantity: this describes a fall in supply. Wrong.
• B. Both increase: this describes a rise in demand. Wrong.
• C. Lower price and higher quantity: matches our analysis. Correct.
• D. Both decrease: this describes a fall in demand. Wrong.

**Answer: C.

Exam tip: Remember the pattern:

• Supply and price move in opposite directions (supply up, price down; supply down, price up). Quantity moves with supply.
• Demand and price move in the same direction (demand up, price and quantity up).

Think of the Nigerian market in harvest season. Tomatoes or yams are plentiful (supply rises), so prices drop and more people buy more.