Question

Q3. How will each of the following changes in demand and/or supply affect equilibrium price
and equilibrium quantity in a competitive market; that is, do price and quantity rise, fall, or
remain unchanged, or are the answers indeterminate because they depend on the magnitudes of
the shifts اإلزاحة مقادير ?Use supply and demand diagrams to verify your answers.
Case (Event) Effect on Pe Effect on Qe
a. Supply decreases and demand is constant.
b. Demand decreases and supply is constant.
c. Demand increases and supply increases.
d. Supply increases and demand decreases.
e. Demand decreases and supply decreases.
Provide your drawings for the five cases in Q3 above in this space!
a. b. c.
d. e.

Answer 1

Effect on euilibrium price and quantity when

a. supply decreases and the demand is constant

  

Figure 1

• initial equilibrium is at E
• supply curve shifts to its left from S to S₁
• demand is constant at D
• the new equilibtium is at E₁
• price rises from P to P₁
• quantity decreases from Q to Q₁

b. Demand decreases and supply is constant

  

Figure 2

• initial equilibrium is at E
• demand curve shifts to its right from D to D₁
• supply curve is constant at S
• the new equilibtium is at E₁
• price rises from P to P₁
• quantity increases from Q to Q₁

c. Demand increases and supply increases

  

Figure 3

• initial equilibrium is at E
• demand curve shifts to its right from D to D₁
• supply curve shifts to its right from S to S₁
• the new equilibtium is at E₁
• price remains constant at P
• quantity increases from Q to Q₁

_{​​​​​​​}d. Supply increases and demans decreases

  

Figure 4

• initial equilibrium is at E
• demand curve shifts to its left from D to D₁
• supply curve shifts to its right from S to S₁
• the new equilibtium is at E₁
• price falls from P to P₁
• quantity slightly increases from Q to Q₁

_{​​​​​​​}e. Demand decreases and supply decreases

  

Figure 5

• initial equilibrium is at E
• demand curve shifts to its right from D to D₁
• supply curve shifts to its left from S to S₁
• the new equilibtium is at E₁
• price rises from P to P₁
• quantity remains constant at Q