Draw supply and demand diagrams for market A for each of the following. Use these diagrams to determine how each of the following changes in demand and/or supply affect equilibrium price and equilibrium quantity. ( This is a competitive market.) Your answer should state whether price and quantity rise, fall, or remain unchanged, or are the answers indeterminate because they depend on the magnitudes of the shifts. Your answer MUST contain an explanation of how you arrived at the answer in each case. Do at least four (4) of these, not to include (g) which I have done for you. Although you may include the diagrams in your responses, it is not necessary to include them. If you wish to include "real world" scenarios to illustrate the results of your economic analysis, please do it only after presenting your economic analysis
Hint: In cases where both curves shift, explain the impact of each shift separately. Example: If demand increases, the demand curve shifts to the right causing equilibrium price to increase and equilibrium quantity to increase. If supply decreases, the supply curve shifts to the left causing equilibrium price to increase and equilibrium quantity to decrease. Both of these events cause equilibrium price to rise, so we know that the combined effect of the two shifts will be an increase in equilibrium price. But since equilibrium quantity changes in opposite directions for each of these shifts, the combined effect on equilibrium quantity is indeterminant. Don't bother doing (g) because I've just done it for you.) This is what I mean by "economic analysis".
a. Supply decreases and demand is constant.
b. Demand decreases and supply is constant.
c. Supply increases and demand is constant.
d. Demand increases and supply increases.
e. Demand increases and supply is constant.
f. Supply increases and demand decreases.
g. Demand increases and supply decreases.
h. Demand decreases and supply decreases© BrainMass Inc. brainmass.com August 14, 2018, 2:34 am ad1c9bdddf
This solution depicts supply and demand diagrams.