ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -In order to stay competitive many firms will lower their prices thus lowering the market price for the product. In response to the lower price, consumers will increase their quantity demanded, moving the market toward an equilibrium price and quantity.

Detailed explanation-2: -An increase in demand and a decrease in supply will cause an increase in equilibrium price, but the effect on equilibrium quantity cannot be detennined. 1. For any quantity, consumers now place a higher value on the good, and producers must have a higher price in order to supply the good; therefore, price will increase.

Detailed explanation-3: -Changes in the equilibrium price occur when either demand or supply, or both, shift or move.

Detailed explanation-4: -So far we have looked at shortages and surpluses that were caused by changes in price. In these cases, equilibrium was restored by adjusting prices. If the market experiences a change in demand or supply, the curve of either demand or supply would shift and create a new equilibrium.