Assume in a competitive market that price is initially below the equilibrium level. We can predict that price will:

A. increase, quantity demanded will increase, and quantity supplied will decrease.
B. decrease, quantity demanded will decrease, and quantity supplied will increase.
C. increase, quantity demanded will decrease, and quantity supplied will increase.
D. decrease and quantity demanded and quantity supplied will both decrease.

C) Increase, quantity demanded will decrease and quantity supplied will increase.

Explanation:

When supply and demand curves intersect, we say the market is in equilibrium. That is, quantity demanded and quantity supplied are equal. Price relating to this, is referred to as equilibrium price and its quantity; equilibrium quantity.

  If market price is above equilibrium price, quantity supplied will definitely be bigger than quantity demanded, causing a surplus. Also called excess supply. Ultimately, market price will decrease. But if market price is below equilibrium price, quantity supplied will appear to be less than quantity demanded, causing a shortage which can also mean excess demand. Market price at this point, will rise to contain the shortage.

  When the price of a product is raised, the quantity demanded for that product will decrease until it reaches equilibrium level. Shortages increase the quantity demanded. If there is a surplus, price must reduce to attract quantity demanded and reduce quantity supplied until the surplus is removed. When there is a shortage, price must increase in order to attract supply and reduce the quantity demanded until there isn't any shortages

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