Question

Explain the effect of a change in price of a good or service on a business’s decision on output.

Category- Economics

Answer 1

If demand increases (decreases) and supply is unchanged, then it leads to a higher (lower) equilibrium price and quantity. If supply increases (decreases) and demand is unchanged, then it leads to a lower (higher) equilibrium price and higher (lower) quantity.

Demand Increase: price increases, quantity increases. Demand Decrease: price decreases, quantity decreases. Supply Increase: price decreases, quantity increases. Supply Decrease: price increases, quantity decreases.

Answer 2

If demand increases (decreases) and supply is unchanged, then it leads to a higher (lower) equilibrium price and quantity. If supply increases (decreases) and demand is unchanged, then it leads to a lower (higher) equilibrium price and higher (lower) quantity.

Demand Increase: price increases, quantity increases. Demand Decrease: price decreases, quantity decreases. Supply Increase: price decreases, quantity increases. Supply Decrease: price increases, quantity decreases.