Answer to Question #120001 in Microeconomics for Fahad Ch

Question

How will change in demand and or supply affect equilibrium price and equilibrium quantity in competitive market do price and quantity rise or fall or remain unchanged or are the answer undetermined because they depend on magnitude of shifts?
Use supply and demand diagram for answer
A=demand decrease and supply increase?
B= demand increase and supply constant

Answer 1

• An increase in demand causes the equilibrium price to rise and quantity fall hence leads to a rightward shift of the demand curve while a decrease in the demand causes equilibrium price to fall and quantity increase as the demand curve shifts to the right.
• An increase in supply causes equilibrium price to decrease making the supply curve shift to the right while when supply decreases and demand remains constant the shift in supply will cause price to increase and quantity to decrease.