Answer to Question #187602 in Microeconomics for Dee

Question

Explain theoretically and diagramatically, how the market equilibrium will change:

a) simultaneous increase in demand and decrease in supply where both changes are almost equi- proportionate 

b) simultaneous decrease in demand and increase in supply and decrease in demand is relatively more than increase in supply

Answer 1

a) If demand rises and supply rises, the equilibrium quantity rises, and the equilibrium price will rise, fall, or remain unchanged. If demand rises and supply falls, equilibrium quantity will rise, fall, or remain unchanged, while equilibrium price rises.

b) The equilibrium price will fall as demand falls, and the amount supplied will decrease as well. With all other factors remaining constant, an increase in supply causes the equilibrium price to decline, while the amount demanded rises. The equilibrium price will increase as supply falls, and the amount demanded will fall.

References.

https://www.khanacademy.org/economics-finance-domain/microeconomics/supply-demand-equilibrium/market-equilibrium-tutorial/a/changes-in-equilibrium-price-and-quantity-the-four-step-process-cnx