Answer to Question #160065 in Macroeconomics for Lissa M

Question

How will each of the following changes in demand and/or supply affect equilibrium price and equilibrium quantity in a competitive market; that is do price and quantity rise, fall, remain unchanged?

Answer 1

a) Supply decreases and demand is constant. In this case the supply curve will shift upward and the demand curve will remain unchanged, therefore, the equilibrium price will rise, the equilibrium quantity will fall;

b) Demand decreases and supply is constant. In this case the demand curve will shift leftward and the supply curve will remain unchanged, therefore, the equilibrium price will fall and equilibrium quantity also will fall;

c) Supply increases and demand is constant. In this case the supply curve will shift downward and the demand curve will remain unchanged, therefore, the equilibrium price will fall, the equilibrium quantity will rise;

d) Demand increases and supply increases. In this case the demand curve will shift rightward and supply curve will shift downward, therefore, the equilibrium price will indeterminated and the equilibrium quantity will rise;

e) Demand increases and supply is constant. In this case the demand curve will shift rightward and the supply curve will remain unchanged, therefore, the equilibrium price will rise and the equilibrium quantity will also rise;

f) Supply increases and demand decreases. In this case the demand curve will shift leftward and the supply curve will shift downward, therefore, the equilibrium price will fall and the equilibrium quantity will indeterminated;

g) Demand increases and supply decreases. In this case the demand curve will shift rightward and the supply curve will shift upward, therefore, the equilibrium price will rise and equilibrium quantity will indeterminated;

h) Demand decreases and supply decreases. In this case the demand curve will shift leftward and the supply curve will shift upward, therefore, the equilibrium price will indeterminated and the equilibrium quantity will fall.