Question

If the demand for a good increases by more than the supply of the good increases, then the goods equilibrium price will __________ and its equilibrium quantity will __________.

Answer 1

Answer:

If the demand for a good increases by more than the supply of the good increases, then the goods equilibrium price will increase and its equilibrium quantity will also increase.

Explanation:

Please refer to the attachment.

D zero is the initial demand curve.

D one is the new increased demand curve.

S zero is the initial supply curve.

S one is the new increased supply curve.

P zero is the initial equilibrium price, where D zero = S zero

Q zero is the initial equilibrium quantity, where D zero = S zero

A is the initial equilibrium point, where D zero = S zero.

P one is the new equilibrium price and it is greater than P zero. Here, D One is equal to S One.

Q one is the new equilibrium quantity and it is greater than Q zero. Here, D One is equal to S One.

B is the new equilibrium point, where S one is equal to D one.

Note- Here, increase in demand is more than the increase in supply as seen from the diagram.