Answer to Question #266329 in Microeconomics for Zobia

Question

With the help of graphs, show how the following changes are going to affect the market

equilibrium. Considering the shifting factors of Gul Ahmed Clothing demand;

(a) The consumer is promoted, now earning better salary than before;

(b) J. clothing brand announces the 70% offsale on their entire stock for unlimited time period;

(c) A news channel announces that Eid is expected to be on Thursday in coming week;

(d) With an increase in global connectivity, now consumers are more inclined towards western

clothing.

Answer 1

(a)

Increase in income causes a shift in the entire demand curve to the right while the supply curve remains constant. Excess demand emerges and this makes prices to go up. The market equilibrium price and quantity increases.

(b)

J. Clothing brand demand will increase during the unlimited time period of the 70% off sale on their entire stock. The 70% off sale will reduce its prices and the J. Clothing brand will be available to many customers. The market equilibrium price will decrease and market equilibrium quantity will increase.

(c)

There will be an increase in demand for most of the products to be used in the festive celebrations. The prices will hence be increased. The quantity supplied will also increase. Market equilibrium price and quantity will increase.

(d)

Increase in demand for western clothing will result in an increase in the price of western clothing. The market equilibrium price and quantity will increase.