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14 August, 12:27

Indicate whether each of the following changes will increase or decrease the equilibrium price and quantity, or whether the effect cannot be predicted.

(a) Demand increases; supply remains constant

(b) Supply increases; demand remains constant

(c) Demand decreases; supply remains constant

(d) Supply decreases; demand remains constant

(e) Demand increases; supply increases

(f) Demand decreases; supply decreases

(g) Demand increases; supply decreases

(h) Demand decreases; supply increases

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Answers (1)
  1. 14 August, 12:48
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    (a) This will shift the demand curve rightwards and supply curve remains the same. Hence,

    Equilibrium price: Increases

    Equilibrium Quantity: Increases

    (b) This will shift the supply curve rightwards and demand curve remains the same. Hence,

    Equilibrium price: Decrease

    Equilibrium Quantity: Increases

    (c) This will shift the demand curve leftwards and supply curve remains the same. Hence,

    Equilibrium price: Decrease

    Equilibrium Quantity: Decrease

    (d) This will shift the supply curve leftwards and demand curve remains the same. Hence,

    Equilibrium price: Increase

    Equilibrium Quantity: Decrease

    (e) This will shift the supply curve and demand curve rightwards. Hence,

    Equilibrium price: Indeterminate because of the magnitude of the shift in demand and supply curve.

    Equilibrium Quantity: Increase

    (f) This will shift the supply curve and demand curve leftwards. Hence,

    Equilibrium price: Indeterminate because of the magnitude of the shift in demand and supply curve.

    Equilibrium Quantity: Decrease

    (g) This will shift the supply curve leftwards and demand curve rightwards. Hence,

    Equilibrium price: Increase

    Equilibrium Quantity: Indeterminate because of the magnitude of the shift in demand and supply curve.

    (h) This will shift the supply curve rightwards and demand curve leftwards. Hence,

    Equilibrium price: Decrease

    Equilibrium Quantity: Indeterminate because of the magnitude of the shift in demand and supply curve.
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