Question

How will each of the following changes in demand and/or supply affect equilibrium price and equilibrium quantity in a competitive market; that is, do price and quantity increase or decrease, or are the answers indeterminate because they depend on the magnitudes of the shifts? a. Supply decreases and demand is constant. Price: Quantity: b. Demand decreases and supply is constant. Price: Quantity: c. Supply increases and demand is constant. Price: Quantity: d. Demand increases and supply increases. Price: Quantity: e. Demand increases and supply is constant Price: Quantity: f. Supply increases and demand decreases. Price: Quantity: g. Demand increases and supply decreases. Price: Quantity: h. Demand decreases and supply decreases. Price: Quantity:

Answer 1

a. Supply decreases and demand is constant.

Price: Increases

Quantity: Decreases

b. Demand decreases and supply is constant.

Price: Decreases

Quantity: Decreases

c. Supply increases and demand is constant.

Price: Decreases

Quantity: Increases

d. Demand increases and supply increases.

Price: Indeterminate

Quantity: Increases

e. Demand increases and supply is constant

Price: Increases

Quantity: Increases

f. Supply increases and demand decreases.

Price: Decreases

Quantity: Indeterminate

g. Demand increases and supply decreases.

Price: Increases

Quantity: Indeterminate

h. Demand decreases and supply decreases.

Price: Indeterminate

Quantity: Decreases