Answer to Question #188100 in Microeconomics for Ridham

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

The change in market equilibrium can be determined if the change in demand and supply are in the opposite directions.

a) Simultaneous increase in demand and decrease in supply can lead to an increase in equilibrium price.

b) Simultaneous decrease in demand and increase in supply nd decrease in demand is relatively more than increase in supply will cause the equilibrium price to fall ad equilibrium quantity to fall.