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 Form 3 Business Studies: Demand and supply online lessons

The effect of a shift in demand curve and shift in supply curve on equilibrium price and quantity

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Answer Text:
The effect of a shift in demand curve and shift in supply curve on equilibrium price and quantity.
The effect of an increase in demand on equilibrium price and quantity:
-Demand curve shift to the right and hence changes position.
-equilibrium price increase.
-Equilibrium quantity increases.
-Equilibrium point moves upward.
The effect of decrease in supply on equilibrium price and quantity:
-Supply curve shift and changes position.
-Equilibrium price increases
-Equilibrium quantity decreases.
-Equilibrium point moves upward.
The effect of an increase in demand accompanied by proportionate decrease in supply:
-Demand curve shift outwards
-Supply curve shift leftwards
-Equilibrium price increases.
-Equilibrium quantity remains the same
-There is a new equilibrium point.
The diagram below explains the effects on equilibrium price and quantity of an increase in demand accompanied by a proportionate decrease in supply.
figdemand21720201144.JPG


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