Question

An increase in demand shifts the demand curve to the right resulting in a new equilibrium with:

a. A higher price and a lower quantity.
b. A higher price and a higher quantity.
c. A lower price and a lower quantity.
d. A lower price and a higher quantity.

Answer 1

An increase in demand shifts the demand curve to the right, resulting in a new equilibrium with a higher price and a higher quantity.

Step-by-step explanation:

When an increase in demand occurs in a market, it results in the demand curve shifting to the right. This rightward shift indicates that at every existing price level, a higher quantity is demanded. Consequently, the new market equilibrium will be at a point where both the price and the quantity are higher than before. From the options provided in the question, the correct one is: b. A higher price and a higher quantity. To determine this, you could visualize the change on a demand and supply graph. The original intersection of demand and supply curves represents the initial equilibrium. As the demand curve shifts rightward from D0 to D1 due to increased demand, a new equilibrium is established at the intersection of the new demand curve with the original supply curve. The vertical line from this new intersection to the price axis reflects an increased price, and the horizontal line to the quantity axis shows an increased quantity.