Answer to Question #45439 in Economics of Enterprise for biruk

Question

Given market equilibrium of demand and supply of sugar, what happens to the level of equilibrium price and quantity if market demand increases by 50% while its supply increases by 40%?

Answer 1

Equilibrium price and Equilibrium quantity will increase. If market demand increases by 50% while supply increases by 40% it means that there would be shortage of product. Demand is higher than supply and this will lead to increase of equilibrium price and quantity