Answer to Question #323576 in Microeconomics for Bongeka

Question

Suppose the marketis in equilibrium, and then the demand decreases. What will contribute to reaching the new equilibrium price

Answer 1

A market is said to be in equilibrium when the market forces of demand and supply are equal.

Market forces are the economic factors that affect the demand and supply of a commodity

Equilibrium price is the price of a commodity when the market is in equilibrium

A decrease in demand reflects a fall in the market equilibrium and does the market price.This is caused by factors such as:

• Negative change to taste and preference of commodity by consumers
• Fall in level of consumers disposable income
• Decrease in population
• Fall in price of other related goods and it's remaining constant

When such happens in an equilibrium market, there exist surplus since supply is greater than demand.

Hence the suppliers lower the prices to sell out their surpluses

And thus the new equilibrium price is determind