Question

Suppose the market for good x is in equilibrium. Explain the chain effect if increase in market demand is less than the decrease in market supply

Answer 1

Shift Effects. Upward shifts in the supply anddemand curves affect the equilibrium price and quantity. If the supply curve shifts upward, meaning supply decreases but demand holds steady, the equilibrium price increases but thequantity falls. For example, if gasoline supplies fall, pump prices are likely to rise.Jun 29, 2018