Question

If some sellers exit a competitive market, how will this affect its equillibrium? Using the 3-point drawing tool, show the impact if some sellers enter a competitive market. Label your new curve appropriately. Using the point drawing tool, show the new equilibrium price and quantity. Label this point 'A'. Carefully follow the instructions above and only draw the required objects. According to your graph, when some sellers enter a competitive market, the equilibrium price_________ and the equilibrium quantity________.

Answer 1

When sellers enter a competitive market, the supply increases, causing the equilibrium price to decrease and the equilibrium quantity to increase. The new equilibrium point is indicated on the graph as point 'A'.

Step-by-step explanation:

When sellers exit a competitive market, the supply curve shifts to the left, indicating a decrease in supply. This leads to a higher equilibrium price and a lower equilibrium quantity, as the point of intersection between supply and demand curves moves upwards along the demand curve. Conversely, when new sellers enter the market, the supply curve shifts to the right, indicating an increase in supply. This results in a lower equilibrium price and a higher equilibrium quantity, and the new intersection point on the graph is labeled as 'A'.

Following this analysis, when some sellers enter a competitive market, the equilibrium price decreases, and the equilibrium quantity increases. This is because the additional sellers cause more of the good to be available at each price, which, in turn, puts downward pressure on the price to the new equilibrium point.

Remember: The point where the supply curve (S) and the demand curve (D) cross is called the equilibrium, and the equilibrium price is the only price where the amount consumers are willing to buy is equal to the amount sellers are willing to sell, known as the equilibrium quantity.

Answer 2

when some sellers exit a competitive market, the equilibrium price increases and the equilibrium quantity decreases.

Step-by-step explanation:

Be D=Demand function, S=Supply function, Q=Quantity, P=Price.

In principle, we have that the market is in balance between supply (S1) and demand. This equilibrium point is seen in the graph as E1. Once sellers leave the market, this reduces the supply, which can be seen in the graph as a new line representing the new supply function (S2). This new function generates a new intersection with the demand function, from which we obtain a new equilibrium point E2.

when some sellers exit a competitive market, the equilibrium price increases and the equilibrium quantity decreases.