Question

effects of changes in demand

Answer 1

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EFFECT OF CHANGES IN DEMAND -

• The change in demand will cause equilibrium price and output to change in thesame direction.

1. Decrease in demand will cause a reduction in the equilibrium price and quantity of a good.
2. Increase in demand will cause an increase in the equilibrium price and quantity of a good.
3. Increase in demand causes excess demand to develop at the initial price.

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