Question

(A) Explain changes in equilibrium due to:
(a) Changes in demand and
(b) Changes in supply​

Answer 1

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• a) It might be an event that affects demand, like a change in income, population, tastes, prices of substitutes or complements, or expectations about future prices.

• It might be an event that affects supply, like a change in natural conditions, input prices, or technology, or government policies that affect production.

• B) A decrease in demand and an increase in supply will cause a fall in equilibrium price, but the effect on equilibrium quantity cannot be determined.

• 1. For any quantity, consumers now place a lower value on the good, and producers are willing to accept a lower price; therefore, price will fall.

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