What is the difference between a movement along and shift of the demand curve? Show the impact on the equilibrium price and quantity that results from; (1) an increase in demand, (2) an increase in supply, (3) an increase in both supply and demand. Give an example of the role of supply and demand in decision making.
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Movement along the demand curve usually entails a change in the price of the product or change in the quantity demanded. A movement of the demand curve (or shift in the demand curve) occurs because of some other reason. A shift in demand curve can occur because of an increase/decrease in income, an increase/decrease in the number of substitutes etc.
An increase in demand will lead to a increase in equilibrium quantity and price.
An increase in supply will lead to a decrease in equilibrium price but an increase in equilibrium quantity. An increase in both supply and demand will lead to an increase in equilibrium quantity. However, the impact on price cannot be estimated. If the demand increase is more than ...