Question

within 300 words explain what would happen to prices in a market equilibrium if there is an increase in the demand for a product. Give an example of a real-life situation pertaining to this.

Answer 1

The equilibrium price is the market price where the quantity of goods supplied is equal to the quantity of goods demanded. An increase in demand leads to a rightward shift in demand curve. This leads to competition among buyers, which raises the price. For example, if there is an exporter who is willing to export fruits from Florida to India, he will increase the demand for Florida’s fruits. An increase in demand will cause an increase in the equilibrium price and quantity of a good. Therefore, the supply for the fruits will increase.