Market Equilibrium

Question 1

Describe the results of a change in market demand (only) on equilibrium.

Answer 1

Increase in market demand = Demand curve shifts up and to the right; Decrease in market demand = Demand curve shifts down and to the left;

Increase in market demand w/no change in supply = Increase in both equilibrium price and equilibrium quantity;

Decrease in market demand w/no change in supply = Decrease in both equilibrium price and equilibrium quantity.

Question 2

Describe the results of a change in market supply (only) on equilibrium.

Answer 2

Increase in market supply = Supply curve shifts down and to the right; Decrease in market supply = Supply curve shifts up and to the left;

Increase in market supply w/no change in demand = Decrease in equilibrium price and increase in equilibrium quantity;

Decrease in market supply w/no change in demand = Increase in equilibrium price and a decrease in equilibrium quantity.