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Supply and Demand 5 (A Change in the Number of Consumers in the Market

Supply and Demand 5 (A Change in the Number of Consumers in the Market

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Answer #1

In each of the following graphs, D0 and S0 are initial demand and supply curves intersecting at point A with initial price P0 and initial quantity Q0.

(Case A) Number of consumers in market increases.

An increase in number of consumers will increase market demand, shifting demand curve rightward, increasing both price and quantity. In following graph, as D0 shifts right to D1, it intersects S0 at point B with higher price P1 and higher quantity Q1.

(Case B) Number of consumers in market decreases.

A decrease in number of consumers will decrease market demand, shifting demand curve leftward, decreasing both price and quantity. In following graph, as D0 shifts left to D1, it intersects S0 at point B with lower price P1 and lower quantity Q1.

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