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8. What happens to equilibrium price of a commodity if there is an increase' in its demand(CBSE Sample Question Paper 2010and 'decrease' in its supply? |
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Answer» Surely the price will increase, but depending on how far the supply curve shifts left, the equilibrium quantity could be more, less or the same . To visualise this on sketches, it is a good idea to put a vertical line at the original equilibrium point's price, draw therightshifted new demand curve, and draw a dottedleftshifted supply curve through where the new demand curve intersects the dotted line, because here the supply curve has only decreased enough to keep the quantity demanded the same at that price point, but a further left shifted supply curve would see a higher equilibrium point with less quantity demanded. |
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