The correct answer is option1i.e increases in demand accompanied by a decrease in supply. ● Demand In creases but supply decreases ∘ Here the demand and supply curve moves in the opposite directions. ∘However, the demand curve shift towards the right(indicating an increase in demand), and the supply curve shift towards left(indicating a decrease in supply). ∘Further, this is studied with the help of the following three cases: Increase in demand = decrease in supply ■ When the increase in demand is equal to the decrease in supply, the shifts in both supply and demand curves are proportionately equal. Effectively, the equilibrium quantity remains the same however the equilibrium price rises. ∘ Increase in demand > decrease in supply ■ In this case, the right shift of the demand curve is proportionately more than the leftward shift of the supply curve. Hence, both equilibrium quantity and price rise. Increase in demand < decrease in supply ■ If the increase in demand is less than the decrease in supply, the shift of the demand curve tends to be less than that of the supply curve. Effectively, equilibrium quantity falls whereas the equilibrium price rises.