ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Which of the following is generally true after a shift in supply or demand? Equilibrium is gradually restored. What can you say about the Larvines’ demand for meals at the Japanese restaurant? It is elastic; a small increase in price resulted in a large decrease in consumption.

Detailed explanation-2: -A decrease in demand will cause the equilibrium price to fall; quantity supplied will decrease. An increase in supply, all other things unchanged, will cause the equilibrium price to fall; quantity demanded will increase. A decrease in supply will cause the equilibrium price to rise; quantity demanded will decrease.

Detailed explanation-3: -If the demand curve shifts to the right, demand increases, leading to a higher equilibrium price. A shift to the right would result in a rise to the equilibrium, meaning higher prices. If demand has dropped, it is unlikely that they would increase their prices as it could result in a further decline in demand.

Detailed explanation-4: -When supply remains constant, but the demand surges, it tends to shift the demand curve rightwards. If the demand for a product steadily rises, it ultimately affects the equilibrium price. Therefore, this price rise also increases competition among buyers, which also hikes the price of a product.

Detailed explanation-5: -When both the demand curve and the supply curve shift rightward, the equilibrium quantity increases, but the equilibrium price may increase, decrease or remain unchanged, depending on the magnitude of shifts in the the two curves.