Question

Discuss what happens to the equilibrium price and quantity of Colgate Toothpaste when there is an increase in the demand for Colgate Toothpaste but no change in the supply. What could cause an increase in the demand for Colgate Toothpaste but no change in supply?

Answer 1

Answer:

The demand of a product may increase due to several factors, including a decrease in the product's price, an increase in the price of the competition (substitute products), a decrease in the price of complement, or an increase in consumer income.

The company can only control the price they charge for the product, but they do not control the other external factors. If the supplier is able to increase the quantity supplied, the equilibrium price might not vary at least in the short run. If the external factors continue then the equilibrium will probably increase.

If the quantity demanded for Colgate increases, but the supplier is not able to increase the quantity supplied, then the equilibrium price will increase due to a shortage of the product.