Question

A Market for a good is in equilibrium. Demand for good ‘increases’. Explain the chain effects of this change.


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Answer 1

: The chain effects of this change are

When the price is constant, surplus demand emerges.

This also increases the competition among the buyers insisting them to raise the price

A rise in the price of a product cause fall or decrease in the demand and expansion or rise in supply

The cost of the product continues to increase until the market is in balanced at a greater price.

Answer 2

Explanation:

A market is in equilibrium when price adjusts so that quantity demanded equals quantity supplied. If price is greater than equilibrium level, there will be a surplus, which forces price down. A market is in equilibrium when price adjusts so that quantity demanded equals quantity supplied.