Answer to Question #100634 in Microeconomics for Usman Tariq

Question

Determination of equilibrium price & quantity (diagram & mathematical calculation)
Changes in demand and supply to changes in the market equilibrium

Perfect competition:
The difference between normal and supernormal profits
How profit and losses lead to entry and exit

Answer 1

An increase in demand of the products causes the equilibrium price to rise while a decrease in demand causes the equilibrium price to fall.However, an increase in supply causes the equilibrium price to fall while a decrease in supply causes the equilibrium price to rise.

Normal profit is the minimum profit to keep binding firms in the market thus, insufficient to attract new firms while super-normal profit is any extra profit above the normal profit and attract new firms into the market.

Economic profits when existing in the market they attract entry of new firms into the market while losses lead to exit of firms making a perfectly competitive firm not earn economic profit.