Question

Starting from a point of market equilibrium, suppose the demand curve shifts left and the supply curve shifts right. What will be true of the new equilibrium quantity relative to the starting point?

Select all that apply:

• the equilibrium price will be lower

• the equilibrium price will be higher

• the equilibrium quantity will be lower

• we cannot be sure how equilibrium quantity will change

2)Suppose that stock market investors expect a booming economy and a higher overall price for stocks over the next year. Indicate the changes in the stock market by shifting the demand and/or supply curves.

Answer 1

From the first graph, it can be inferred that if the demand shifts right and supply left, the price decreases but when it comes to quantity nothing could be said as if the demand effect is more, then quantity decreases, if supply effect is more, then quantity increases or quantity could be equal as well

Therefore a, d are the answers to this question

2) If the stock market boom is expected, people demand more now as they expect return in the future and this tells us that the demand curve shifts right and prices of stocks increases.