Answer in Microeconomics for Kamogelo Mphalo #111861
Q5.1 An increase in demand while the supply remains unchanged causes equilibrium price and quantity to increase. Due to increase in demand the quantity demanded will increase this will thereby increase competition in the market which will lead to increase in price of the product. hence, when the price increases demand decreases to reach to equilibrium and new equilibrium quantity and price will be derived.
Q5.2 By itself a supply decrease results in a decrease in equilibrium quantity and an increase in equilibrium price. A simultaneous increase in demand and decrease in supply unquestionably generates an increase in the price. However, the change in the quantity is in-determinant.
Q5.3 supply increase results in an increase in equilibrium quantity and a decrease in equilibrium price. A simultaneous decrease in demand and increase in supply unquestionably generates a decrease in the price.