Question

Discuss how the equilibrium price and quantity change when a change in demand occurs and the supply stays constant, and when a change in supply occurs and the demand stays constant.

Answer 1

When the demand curve shifts the demand curve will shift to its left of right. Refer the picture attached below

As we can see the demand curve has shifted to its right. Hence, the equilibrium quantity and price both have increased here.

When the demand curve shifts to its left then the equilibrium quantity and price both will decline.

Now, consider the case of shift in supply cure . When the supply curve shift to its right then the quantity demanded increas.   Refer the attached picture below

The shift in Supply curve increases from Q to Q1 and the price decreases from P to P1.

Thus, when supply increases the quantity declined and the prices also decrease.

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