Answer to Question #267719 in Macroeconomics for haseeb

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, or are the answers indeterminate because they depend on the

magnitudes of the shifts? Use supply and demand diagrams to verify your answers.

Answer 1

a. Supply decreases and demand is constant - equilibrium price increases, equilibrium quantity falls.

b. Demand decreases and supply is constant - equilibrium price decreases, equilibrium quantity falls.

c. Supply increases and demand is constant - equilibrium price decreases, equilibrium quantity increases.

d. Demand increases and supply increases - equilibrium price is indeterminate, equilibrium quantity increases.

e. Demand increases and supply is constant - equilibrium price increases, equilibrium quantity increases too.

f. Supply increases and demand decreases - equilibrium price falls, equilibrium quantity is indeterminate.

g. Demand increases and supply decreases - equilibrium price increases, equilibrium quantity is indeterminate.

h. Demand decreases and supply decreases - equilibrium price is indeterminate, equilibrium quantity falls.