Question

Suppose that in the U.S. consumer market, the demand for credit cards is increasing. As the demand for credit cards increases, what are the effects on the equilibrium quantity and interest rate in the market for credit? Illustrate this effect on the graph below by shifting the appropriate curve.

Answer 1

Both equilibrium quantity and interest rate will shift to the right.

Step-by-step explanation:

A shift to the right on those two factors candidates a general increase in the market.

As a demand for a certain product increase, The producer will match it up by increasing the supply of that product in order to accommodate as many consumers as possible. This will cause the equilibrium between demand and supply increased.

As the consumers base grow, there will be more competitors show up to offer the credits for the customers. This will make the potential income that credit providers decreased. As a response, it is very common for them to raise the interest rates for the credit.