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What could explain the simultaneous increases in the price of lithium and the production of lithium? Use supply and demand curves to explain your answer. (Hint: Price and equilibrium quantity have both increased. Would a shift in the demand curve or a shift in the supply curve lead to this result?)

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Answer #1

An increase in the demand for the lithium and an improvement in the technology used in the production of the lithium will shift the demand and the supply curve to the right respectively. This will increase the quantity of the goods in the market and price increase will be indeterminate. AS an increase in the demand will increase the price and increase in supply will decrease the price making the price indeterminate but the quantity will increase.

The demand and the supply curve will shift to the right and the new equilibrium will shift from A to B.

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